Post
Topic
Board Bitcoin Discussion
Re: Scarcity doesn't always mean value
by
tee-rex
on 02/09/2018, 09:13:51 UTC
I do not think this is true.
If utility is that important then Copper shouldn't be cheaper than Gold or Aluminum cheaper than Copper. Gold is mostly use for decorative purposes. Copper and aluminum has more utility.

Having utility is as important as being scarce. Citing myself on that part:

Neither scarcity nor utility can determine the price on their own. It is their balance that leads to a price discovery through market means. For example, an asset can be as scarce as hen's teeth, but it still might be worthless. How come? Because being scarce is nowhere near enough to be valuable. To have a price, an asset should also have or provide utility.

In this way, the answer to your remark should be straightforward and simple. While copper and aluminum have without doubt greater utility than gold, they are not as scarce as the latter is. In fact, this is a good example when one asset (copper) has greater utility than another (gold) but because of it being less scarce (more abundant), its market price turns out to be lower than the price of its counterpart. And unlike gold, which is truly unique, copper can be substituted by other materials.

If copper becomes more rare and it doesn't get substituted fully or partially with something else (the same aluminum), its price will rise. In real life, this is what happens with any commodity whenever there is a shortage.