The Diamond-Water Paradox – Diamonds Are Forever. How About Water?

From Rock to Ring

1 – Formation

Millions of years ago, intense heat and pressure caused loose particles of carbon hundreds of miles below sea level to crystallize into diamonds. Volcanic eruptions then pushed the diamond-2bearing ore close to the earth’s surface.

2 – Mining

The ore, known as kimberlite, is dug or blasted from mines; the deposits are then crushed and boiled in grease and water to separate the diamonds. About 80% of the world’s rough stones come from Angola, Australia, Botswana, Namibia, Russia, South Africa, and Zaire.

3 – Sorting

The rough diamonds are sorted and valued depending on shape, quality, colour, and size before being sold to cutting centers, primarily in Antwerp, Bombay, New York, and Tel Aviv. The value of diamonds sold to the world’s cutting centers each year is nearly $10 billion.

4 – Cutting

Cutters first remove unwanted pieces of the stone, then rub two diamonds together to shape the main stone.

5 – Polishing

The stones are then polished with lathes or computer-guided laser beams before being sold and traded worldwide.

6 – Jewelry Production

Artisans fashion the stones into jewelry. The value and quality of a polished stone is determined by the four C’s: carat, clarity, colour, and cut.

7 – Retail Sales

Nearly $60 billion worth of diamond jewelry is sold worldwide each year. The U.S. market accounts for 50% of all sales, followed by Japan and Europe.

Sources : De Beers; Tacy Ltd; egemz ltd

(Newsweek, April 19, 2004, Vol. 163, No. 15)


Economist Adam Smith was well known for introducing the diamond-water paradox to the world. According to him, what that has value in use has frequently no value in exchange. Why is water priced so low compared to diamonds? Surely a human being can live without diamonds but not water.

Nonetheless, reality shows us that diamonds with its limited supply is valued much higher than water which can be obtained abundantly.

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