On 7/17/2012 1:49 PM, James C.W. Ahiakpor wrote:
> "Increase the scarcity of gold to a certain degree, and
> the smallest bit of it may become more precious than
> a diamond, and exchange for a greater
> quantity of other goods.  The demand for those metals
> arises partly from their utility, and partly from their
> beauty ... The merit of their beauty is
> greatly enhanced by their scarcity ... these qualities of
> utility, beauty, and scarcity, are the original
> foundations of the high price of these
> metals, or of the great quantity of other goods which they
> can every-where be exchange."

> Smith did use scarcity and utility (value in use) in
> explaining relative market prices.





I believe that, in this particular discussion,
Smith is presenting scarcity as a source of *demand*:

     "The merit of their beauty is greatly enhanced by their
     scarcity. With the greater part of rich people, the
     chief enjoyment of riches consists in the parade of
     riches; which, in their eye, is never so complete as
     when they appear to possess those decisive marks of
     opulence which nobody can possess but themselves. In
     their eyes, the merit of an object, which is in any
     degree either useful or beautiful, is greatly enhanced
     by its scarcity, or by the great labour which it
     requires to collect any considerable quantity of it;
     a labour which nobody can afford to pay but themselves.
     Such objects they are willing to purchase at a higher
     price than things much more beautiful and useful, but
     more common."

fwiw,
Alan Isaac