Have you ever wondered why diamonds cost so much more than water? After all, you need water to live, to bathe, to grow food, to cook, and to wash the car, but you don't need diamonds. Sure they're shiny and pretty, but if you were lost in the scorching desert you wouldn't be looking for a princess cut in a solitaire setting. So why is a one-carat diamond so much more expensive than one gallon of water?
The answer lies in economics--the law of diminishing marginal utility, more precisely. Renowned economist Dr. Art Laffer explains this law and a number of other economic laws in his 10-part series "Thinking Economically." Using easy-to-understand examples, Dr. Laffer explains how prices are determined, why trade works, and his famous Laffer Curve.
The series is designed for policymakers, the media, and anyone interested in understanding how economics affects our daily lives. "Thinking Economically" is available through our website. We invite you to read it and share it with friends and family. Teachers, it's a great tool for students.
Whether you're looking to expand your economic knowledge, or just understand why diamonds are so expensive, you'll find this free series informative and easy to read.
Dan Guerin is a communications associate at the Goldwater Institute.