I intend to open the most fundamental question of the economy: We need much more water for our daily survival than diamonds, but water is much cheaper than diamonds. The problem has been addressed many times, but something is still worth considering.

Various approaches

Different economic theories explain this apparent paradox differently. Objectivism tries to find the value of a good in the product itself. Marxism locates value in expropriation. The subjectivistic economy determines value on a personal level, arguing that it is a marginal personal value that matters. When thirsty, the first glass of water is precious, while the third is not anymore.

I am not going to go through the various nuances of various theories since my purpose is different. All the theories mentioned fail to recognize that human beings exist not only on the material/genetic level but as much, if not even more, on the memetic level. On the genetic level, all objective and subjective theories work because they all address physical utility only. But it is a memetic level that opens a “paradox” within the “diamonds question.”

The memetic approach

While diamonds are scarcer than water, they also have no functional value. All theories, including marginal utility theory (von. Mises), fail to address properties outside the physical utility of a product. And with a product with no functional utility, the abovementioned theories cannot explain market demand and price. They all behave as we would in the story of the naked king. Everyone sees he is naked, but until one shouts: “The king is naked”, nobody perceives him as naked. Better: they all perceive him as naked but cannot conceptualize him as naked. According to existing theories, one should only shout: “Diamonds have no value,” and the price of diamonds would collapse immediately. But in reality, we do not have a naked king!

My claim is that humans need diamonds. One can not persuade a customarily developed human not to strive for what he needs, and one can also not force anyone to buy anything that he does not need. What seems like irrational customer behavior from an objective point of view becomes entirely rational from a memetic perspective. 

All needs are functional

From his perspective, all needs are functional. No one from the outside can decide what is functional for anyone. Only the memes that drive my personal life and my own experience are decision-makers about the functionality of objects for me.

That is why I say through the Standard Branding Model that it is not some subjective mystery that runs markets and prices. Memes are namely not subjective but intersubjective. They are as objective as genes but of a different kind of objectivity. (More on that in the coming Memetics, 2024)

A famous story about wine blind testing tells us a lot in this respect. In this (true) story, sommeliers had five similar glasses, each filled with wine from one bottle. The only difference was the price tag on the front of each glass of wine. Their evaluation of the quality of wines followed price tags without exception. They all said that the wine in the glass with the highest price tag was better than the one a bit “cheaper.”

The price as intrinsic value

This story confirms the proposition from the Standard Branding Model that price is the brand’s intrinsic value. Price is a part of brand identity and is not something that is externally (later) tagged on. For that reason, we can raise the product value (perceived value) merely by raising the price. Such raising goes to a certain level only, to be sure. 

To recapitulate, all eight brand identity elements belong to the memetic level, while a brand’s functional value is understood on the material/genetic level. Each brand’s nine elements construe a final brand value in a highly complex manner. One can not and should never single out one identity element and develop any theory on such an isolated part.