When diamonds, markets collide: How abundance challenges value

The enduring allure of diamonds as symbols of value, love, and scarcity is facing a profound test in today’s rapidly changing economic landscape. A recent opinion piece from Bloomberg poignantly captures the existential dilemma experienced by market enthusiasts as the rise of lab-grown diamonds and the broader phenomenon of abundance unsettle traditional notions of worth. 

The Paradox of value

The piece begins by revisiting one of economics’ foundational puzzles highlighted by Adam Smith — why diamonds, with limited practical use, command prices far exceeding essential resources like water.

The answer has historically been scarcity, amplified by clever marketing that embedded diamonds deeply into cultural narratives around eternal love. However, the advent of lab-grown diamonds, produced quickly and in unlimited quantities, threatens this scarcity.

As these alternatives flood the market at a fraction of the cost, the price and symbolic power of natural diamonds have tumbled sharply.

Scarcity under siege

The opinion extends the analysis beyond diamonds, noting a broader economic trend: commodities once valuable because of their scarcity—luxury handbags, music, media, even intelligence—are becoming widely accessible and often abundant.

This abundance is disrupting traditional market dynamics, leaving businesses struggling to maintain value and profitability. The democratisation of music and media content exemplifies how digital innovation can drastically shift what consumers perceive as valuable, complicating the ability of markets to price goods consistently.

Future of value

The Bloomberg piece argues that while abundance challenges established value systems, markets historically adapt over time, segmenting goods by quality and exclusivity. It draws a parallel to luxury handbags, such as the Hermès Birkin, where strategic supply control maintains scarcity and exclusivity, preserving high demand and prices despite the availability of indistinguishable fakes.

For diamonds, the path forward may involve a bifurcated market: natural diamonds remain prized symbols for an elite few, retaining their value and mystique, while lab-grown and lower-quality stones become commoditised or even obsolete.

This segmentation, if realised, would reaffirm the market’s power to create and sustain value through managing scarcity and perception.

The piece closes on an optimistic note: despite the current “crisis of abundance,” markets will eventually recalibrate, just as they did with goods once scarce but now plentiful, like food and consumer goods.

The enduring lesson is that markets’ beauty lies in their ability to assign value—even amid disruptive abundance—and that preserving a sense of rarity and meaning is essential.

For those who cherish both commerce and beauty, this evolution promises a restored faith in market forces and the symbolic power of cherished commodities like diamonds.

By Sabina Mammadli