Health Economics | Dentistry
The Diamonds-Water Paradox and Healthcare
Why increasing availability of healthcare can lead to devaluing its benefits.
What is valuable?
How do we place value on health care? On dental care? On dental implants, for example? Simply, we don’t. It depends on how much of the service or how much of the product is used. Dental implants elucidate this principle, and can be applied to many aspects of healthcare.
What is the Diamonds-Water Paradox?
Adam Smith, despite being one of the most renowned figures in modern economics, could not fathom why water — a valuable necessity for human life — cost so little compared to diamonds, which were purely decorative.
Our simple model of inverse demand can illustrate this nicely below.
Imagine you’re dehydrated. That first glass of water is very valuable. The second is worth less, and the third worth less, further still. Now thinking more realistically, water is abundant in most of the world so that it’s available to pretty much…
