Is it true that the price of diamonds is based on a monopoly?
"Yes, the De Beers Group of Companies is a diamond cartel that had complete control of the diamond market for most of the 20th century. They still control a sizable portion of the market and their effort at marketing (particularly with the slogan ""A Diamond is Forever"") has done much to inflate the market for diamonds in our society. The intrinsic value of diamonds is much lower than the market prices currently reflect, but with the caveat that there is a rarity factor which does drive up the price of larger diamonds. The larger the diamond, the more likely it is to have flaws, so when it comes to diamonds that are 5 carats or greater, you are not as likely to see a new supply of diamonds disrupt the prices of those larger stones. Some other ways that high end jewelers and suppliers are differentiating themselves is by patenting a specific cut that they design. This is another barrier to entry that works to create some artificial price inflation. One common example is the Lucida cut sometimes referred to as the Tiffany cut. Diamonds can also be manufactured. The same carbon structure can be grown in a lab. These stones have the same carbon structure as natural diamonds but without the flaws and visible impurities. Most manufactured diamonds are used industrially, but processes have improved sufficiently to allow for gemstone quality synthetic diamonds. They sell at a decent discount, so that might be an option to consider if you want a substitute. In the years to come, you can expect prices for synthetic diamonds to continue to decrease which will probably put some further downward pressure on jewelers' prices." diamonds are intrinsically worthless -- and therefore have quite little resale value It may be true that De Beers has a near monopoly on diamond supply, but they are still a scarce resource, so their supply is still very limited.  They do have resale value - that's one reason why diamond jewelry is stolen so often. There's just not a huge secondary market for diamonds that I know of (unlike cars, for example).  You can sell diamond jewelry at pawn shops or online brokers, but you probably only get a fraction of their retail value. They are not intrinsically worthless.  They do have value in the industrial sector as powerful cutters, although synthetic diamonds are much more prevalent in this market.  Their value in industry is much lower than their worth as jewelry. Think about gold - it does not have a monopolic supplier but it still has a relatively very high value. De Beers is the company most cited as the near monopoly. They used to own a massive chunk of the diamond supply and intentionally restricted that supply to increase the price. In recent decades, new sources of diamonds have reduced the De Beers' singular grip. They still have a large share though. Video about this from Adam Ruins Everything: https://www.youtube.com/watch?v=N5kWu1ifBGU it turns out this ancient tradition [of giving diamonds rings for engagements] was invented less than a century ago by the De Beers Diamond Corporation... in 1938, the De Beers Diamond cartel launched a massive ad campaign, claiming that the only way for a real man to show his love is with an expensive hunk of crystallized carbon, and we bought that shit. It continues The only reason diamonds are even expensive is that De Beers has a global monopoly on diamond mining and they artificially restrict the supply, to jack the prices up. Because of this artificial supply restriction, the resale value of diamonds are quite low. "diamonds are intrinsically worthless this is simply wrong. (1) Diamonds that are sold for anything less than, oh, let's say $5000 at original retail - are indeed utterly, totally, completely worthless. It is simply ""one of the great scams"". Their real ""price"" is maybe ""five bucks"". End of story. There is no secondary market.  Literally - ""end of story"". If you buy a ""diamond"" lol for ""$2000"" to impress your loved one, you can not then ""sell it"" for any amount of money.  It is: worthless. Once again: simple, undeniable fact. the diamond you bought for 2 grand cannot be resold. Ir's worthless. (OK, maybe you can get 100 bucks for it, something like that. Or, you can scam someone clueless, and get 200 bucks.) (2) However actual ""investment"" stones do in fact have a value - if somewhat fragile. Example, a few years ago I sold a stone for 30 thousand. That was a ""real"" price and it was quite liquid - I was within days able to find a buyer. (A dealer - he would have then sold it on for 35 or whatever.) I have never dealt in stones over six figures, but I'm fairly certain those are ""real"" valuable objects: just like paintings by name artists. (However: yes, the line between ""laughable diamonds"" and actual investment stones, is indeed moving ever upwards.) (Note - the ""elephant in the room"" with diamonds is that GE's industrial process for simply making utterly flawless diamonds, starting with carbon, is getting better every decade.) (A second overwheleming point that nobody has mentioned: diamonds get beat-up.  Regarding ""engagement ring diamonds"", a used one is exactly as useless as a used car.  It's crap.  Just as with $200,000 picassos, this concept does not apply to ""actual investment stones"".) Note that many of the comments/arguments on this page are very confused because: people are not distinguishing between the (ROFL) ""engagement ring scam market"" and the rarefied ""investment gem market"". The two things are utterly different. Yes, ""engagement ring diamonds"" are an utter scam, and are simply: ""worthless"".  The fundamental, basic, overwhelming scam in today's business/social universe is: ""engagement diamonds"". Yes, the price is only due to marketing/monopolies etc. Elephant in the room A: GE's technology can - end of story - manufacture diamonds.  (Starting with ""pencil leads"".)  End of story.  It's all over. Elephant in the room B: folks forget that diamonds get beat-up, they are just like used cars. Regarding ""engagement-ring diamonds"", nobody has ever, or will ever, bought a used one. Simple, utterly undeniable fact: regarding ""engagement ring diamonds"". they have: zero value.  You cannot resell them. End of story. If you buy a house, you can resell it. If you buy a car, you can resell it (at a spectacular loss). If you buy a picasso, you can resell it (almost always making a huge profit). If you buy an ""engagement ring diamond"", it is worth: nothing. Zero. Nada. strictly regarding investment stones, which is a distinctly utterly different market.  This market has no connection, in any way, at all, even vaguely, it is utterly unrelated, to ""engagement ring diamonds"".  You can in fact buy and sell these items - very much like say ""art"" or ""mid century antiques"", and make money. This market just has utterly no connection to the whole ""engagement ring diamonds"" scam system. Say you buy wine at the supermarket, for 5 to 100 bucks a bottle. If you think that the ""wine"" thus bought, has a secondary market, or you can invest in it or something: you have lost your mind. In total contrast: Yes, although totally flakey, there is indeed an ""investment wine market"" which is real and reasonable. I for example have made some money in that. (I have a great anecdote even - I had one cellar of wine in burgundy, which could have been sold for, say, 30 grand - but we drank it  :)  ) Again, the (somewhat bizarre) actual market in investment wine, just has to ""buying wine in the supermarket"".  To further the analogy: wine prices in the supermarket / your (ROFL) wine dealer, from 5 to 100 bucks, are just: utterly laughable. Utterly. Laughable. Much as folks sit around, and decide on ""label designs"", they sit around, and decide on ""price points"". There is, utterly, no difference between $5 and $100 grape juice rofl ""wine"". The price difference is simply a marketing decision: at best, you can think of it as a Velbin good. ... exactly the same applies to ""engagement ring diamonds""."
"Could that be that you have been SOLD the notion that antitrust laws are a failed and discredited policy.... by those intent on protecting private cartels? (Republicans). Could it be that the enforcement arm of the government (like the SEC) have been weakened and captured by lobbyists in a revolving door between the private sector and the the government (facilitated by Democrats too)?   With that said, before corporations, we had feudal lords with the same oligopoly/monopoly desires. In capitalism, unchecked greed leads to the destructive behavior of endless accumulation of resources at the expense of others... if you start out from a competitive vantage point. This is the ""free market"" that Republicans harp on about. It is the ""freedom"" to reap your rewards without any obstacles, even if reaping your rewards means gauging customers because you have swallowed up the competition. This is what Republicans want (and what libertarians are too naive to understand). How does this environment protect the small business or how does it benefit consumers?" Yes, the supply side is probably permanently restricted, and if NIMBY/regulations eased, there might be a temporary dip in prices (possibly even something that could be regarded as a bubble pop, but in reality that is very unlikely.)  The self-regulating system I see is on the demand &amp; employment side; companies can't keep raising wages but still require the workers, so they will have to sort workers by location: executives, creatives, and professionals in large cities; back-office white-collar in suburbs and/or smaller cities and production/manufacturing in rural areas. Definitely more in the economics wheelhouse, but I thought it would be interesting to write a research paper on the black market premium. With marijuana becoming legalized in more and more districts it's interesting to see the effect on prices.  I live in Canada and many of my friends are very sure that prices will rise because of taxes. I am not so sure. I think economies of scale and getting rid of the black market premium will more than make up for the costs of regulation and taxation. I wrote a simple monopoly simulation a few years back. The simulation handicapped one player for a set number of turns and then released the handicap eventually. Long story short, the initially handicapped player almost never recovered except when I handocapped the other players, bonussed the initially handicapped player and they had lucky turns. I ran this simulation tens of thousands of times.  The reality is that there is a strong deterministic element to social and economic structures from generation to generation which require exceptional policy interventions or extraordinary players/people to overcome. In my mind these are quite different, though maybe there is some vague analogy in meta-space that is escaping me.  This isn't about manipulating scarcity or demand, it's about manipulating pricing. I guess the common thread is that it's about manipulating. :)  The motivation is to skirt the commercial code requirement that you can't charge people differentially by ability-to-pay by dividing the market into a high end and a low end, and giving the people who can't pay as much a less desirable product.  In this case, producing the high end product is easily possible to do for everyone, but if you put it at the high price, you'd get too few buyers and if you put it at the low price, you'd leave money on the table.  Similar schemes have been used in airlines to charge businesses more by assuming they have to plan things last-minute and making the high price be around changeability of tickets, and assuming vacations are planned longer out and are really being sold to a market of people with less money to spend.  By controlling the character of the sale in a situation where delivery of the product costs about the same, you maximize the revenue.  It used to be, though no longer is, that phone calls were done this way, too.  You got better pricing off-hours even though the phone lines were there 24/7 because it was assumed that the only people who must have phone calls, especially long distance, were businesses who could afford steeper prices.  By calling off-hours calling a different product, you could charge less for it and thus do the only thing you really wanted, which is to get maximal amounts of money out of business and non-business people based on their ability to pay, but by a dodge that caused the products to be differentiated, so that it couldn't be said you were charging based on ability to pay. Sort of free market system when there are resource limits. The city doesn't sell the medallions for $2M, but they do artificially limit the number available. All the mediallion owners bought and sold the medallions on the grey market, and that drove up the price. They all speculated on something very risky. Just like Pogs or Beanie Babies, if the city suddenly decided to double the number of medallions, these owners would have likewise been screwed. The real estate industry today is highly exploitative, you're right, but there are currently nothing stopping rents from rising. The major controls in place are are primarily supply constraints, which would lower prices if removed by allowing small, entrepreneurial developers and builders to create new housing more easily. There's also nothing to stop institutional investors from buying up all the housing right now, but those investors are generally not looking for high growth, they're looking for stable returns. Apartment buildings are viewed as similar to blue chip stock portfolios in that regard. Low growth, but also low risk.  The reason capitalism wouldn't lead to monopoly is that it takes work both to gain resources, and to retain them, and the most reliable way to retain them is to reinvest them in the economy. Investment permits new businesses to grow, and new industries to form. It's precisely because the economy isn't limited to a fixed size that wealth of one group doesn't require to poverty of others. New value creation is the core of the theory, and nearly every living person has at least some capital (their body and mind) to begin employing toward value creation.  I recommend reading Henry Hazlitt's Economics in One Lesson if you'd like to understand the theory behind why and how free market capitalism is supposed to work. Because Amazon is not even close to being a monopoly. Look at Wal-Mart revenue to Amazon revenue (even with  AWS and everything else). Not even close to being the largest retailer. They are just the largest e commerce retailer. Even there, they still aren't a monopoly.  Add in the fact that a lot of amazon sales are marketplace sales (other online vendors selling through amazon), and you see that Amazon isn't even close to being a monopoly.  Amazon is just really good at retail. Being so good at something that you gain market share is not covered under anti trust law. "Anticompetitive behavior is only illegal if a monopoly does it, and amazon is not a monopoly. But with billions in the bank, they can act like one indefinitely, which makes me wonder if we should rethink those laws.    Edit: ""only illegal if a monopoly does it"" might not be accurate in this case. It might just be that American courts are reluctant to take action against this sort of thing." "This is the best tl;dr I could make, [original](https://www.thenation.com/article/america-has-a-monopoly-problem-and-its-huge/) reduced by 88%. (I'm a bot) ***** &gt; Some century and a quarter ago, America was, in some ways, at a similar juncture: Political and economic power seemed concentrated in a few hands, in ways that were inconsonant with our democratic ideals.  &gt; Importantly, these laws were based on the belief that concentrations of economic power inevitably would lead to concentrations in political power.  &gt; Chicago economists would argue-with little backing in either theory or evidence-that one shouldn&amp;#039;t even worry about monopoly: In an innovative economy, monopoly power would only be temporary, and the ensuing contest to become the monopolist maximized innovation and consumer welfare.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/78l28c/america_has_a_monopoly_problemand_its_huge/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~234550 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **power**^#1 **market**^#2 **economic**^#3 **economy**^#4 **Monopoly**^#5" "Mervis Diamond is voted as ""Best Place to Buy a Diamond"" by the readers of WashingtonPost.com. It is not a normal jewelry store. They specializes in diamond engagement rings and wedding bands, diamond studs, and much more. With their roots at diamond mines in South Africa, they maintain strong relationships and import all their own diamonds. Mervis has a reputation you can trust. For any budget, they will get you the biggest and most brilliant diamond possible, and save you some dollars in the process." "That has not been disproved. What the quote means is ""when [workers as a collective] earn more, [businesses as a collective] get more customers"". It's impossible to disprove this, because it's like a kind of economic tautology. It's like, if I give you five one dollar bills, how many five dollars will you have.   What you mean to argue is that that's spacious, because the real world is more complicated." Yes, but the move to regulated monopolies is tactical. Duke's deeper strategy is to prepare for the coming rise of distributed generation. Hiding behind regulatory barriers is a way to do that, and it gives them a stronger lobbying platform from which to attack DG, pushing for grid connection surcharges that will cripple rooftop solar. It's a copy of similar utility strategies in places like Spain and Australia. "This is the best tl;dr I could make, [original](https://www.project-syndicate.org/commentary/monopoly-power-wealth-income-inequality-by-mordecai-kurz-1-2017-09) reduced by 94%. (I'm a bot) ***** &gt; In a recent paper measuring the economic effects of monopoly power, I approximated normal levels above which profits or stock values are not purely chance events, but rather reflective of monopoly power.  &gt; With these levels, I measured the monopoly component of total stock values - what I call &amp;quot;Monopoly wealth&amp;quot; - and of monopoly profits or rent.  &gt; First, because most technology-based monopoly power does not violate existing antitrust laws, regulating IT will require new measures to weaken monopolies.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/7268jg/the_new_monopolists_by_mordecai_kurz/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~215755 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **monopoly**^#1 **wealth**^#2 **power**^#3 **rise**^#4 **firm**^#5" Without government intervention there's always people willing to buy to lower standards.  I'm not saying that we shouldn't have government intervention but airliners have some of the biggest government intervention so I don't think it is an example of a natural monopoly.