Diamonds Are Not Forever : Adam Smith and Carl Menger on Value and Relative Status

The differences on value between Smith and Menger may be other from previously alleged if status is included as a need satisfied only by truly scarce goods.Given our innate desire to distinguish ourselves and be admired, Smith tells us that scarcity is what generates value. So, our desire for distinction is what drives our demand for “diamonds” and gives them value. But when “diamonds” become as abundant as “knitted stockings”, new forms of scarce status goods must be found. For Menger, value is also a dynamic, evolving “institution” that cannot be understood in a static analysis dealing only with supply and demand at a given moment. But abundance, for Menger, would simply allow us to fulfill higher-level needs. Thus, Smith, but not necessarily Menger, could explain why, as diamond rings, Prada shoes, and Gucci bags can be easily mass produced in identical but “fake” copies, irreproducible goods, such as charity donations and claims on digital art, are taking their place to indicate status in society