The reason diamonds cost more than water is simply because they are more scarce.
One of my few vices is internet chess. Recently, I started playing rapid chess (5 min + 3s per move). I then cultivated the habit of playing several games back-to-back until hours would pass and I realize that it is past midnight. During such moments, I empathize with the citizens of ancient Rome, whose emperor, Nero, was busy fiddling even as the city burnt.
Chess is disproportional in its rewards and punishments. A win feels gratifying, while a loss feels downright agonizing. Perhaps that is why almost nobody plays it – most people aren’t masochists. A loss in chess needs at least a few wins to restore normalcy to the state of a player’s mind. Therefore, rapid chess players are likely to keep playing till they finally win a couple of games. The problem here is that the player doesn’t necessarily get better with each passing game – merely more obsessive. Under these circumstances, rapid chess turns into a game of chance, with obsessive gamblers pulling the levers of a slot machine across the chessboard.
To reduce chess to a game of chance isn’t desirable for any chess aficionado. So, I made amends. I now limit myself to 1 game of rapid chess per day. The first day I did this, I lost the game and realized how I had to wait an entire day to recover from the agony of that loss. I also spent more time analyzing my game than I normally did. The next day, I was primed to play a focused game and avoid blunders that would end my chances of winning in an instant. I played one of my better games and won. I saw this pattern emerge over several subsequent games. When I played less chess, I actually played better chess.
Scarcity serves me well in other aspects of leisure too. My TV streaming is limited to about 20 minutes per sitting, preventing me from binge watching shows. I go to the movies about twice a year, and therefore those movies have to meet a really high bar (in my own subjective taste, of course).
As we’ve seen with the diamond and water example, we have always understood the inherent value of scarcity. We would do well to extend this principle to our interactions on digital mediums. Where abundance is the norm, scarcity becomes even more precious.