The Paradox of Value and Ultimate Comparisons of Worth
In Adam Smith's "Wealth of Nations" draws attention to the fact that while water which is extremely useful costs very little, a diamond which he takes to be useless is very expensive. Many economists claim that this Paradox of Value is a pseudo-problem since price is set by supply and demand rather than the intrinsic worth of the commodity good. I argue that this is correct if we understand the paradox in causal terms. However, it is not at all clear that Smith thought that there was some causal relationship between ultimate value and price. Moreovower, Smith's paradox directs our attention to an important form of practical reasoning that concerns the relationship between prices and the intrinsic vlaue of a thing. This reasoning is central to our daily economic practice and any theory which would deny it as a normative practice does so at its own peril.
Keywords: Value Theory, History of Economics
Dr. Adrian J. Walsh
Senior Lecturer, Philosophy Discipline, School of Social Science, University of new England