Publication Keyword: the water and diamond paradox

A classical structure that is used to analyze the water and diamond paradox provides an intuitive underpinning to the modern theory of welfare measurement in a growth context. John Law’s and Adam Smith’s concepts of value-in-use and value-in-exchange have modern aggregated counterparts. Complemented with Dupuit’s extension in terms of a utility function with a declining marginal utility, they are close to enough to provide the…