ABSTRACT
The value paradox is related to a classic conundrum in economics when it was observed that diamonds sold for much more than water. Consumers of water get a product for less than what they might pay if required. The usual empirical estimate of a demand curve makes the fundamental assumption that real income and the prices of complements and substitutes are fixed. A computable general equilibrium model specified by Mary F. Kokoski and V. Kerry Smith suggests that proportionality in price movements as a result of a nonmarginal project is questionable. Partial equilibrium estimates are subject to large errors and fail to reveal the nonuniform effect on the rich and poor. The partial equilibrium character of consumer surplus creates further problems. It seems plausible that more revenue could be collected for any given product by price differentiation. The distribution of rents is another problem that arises out of the interdependence occurring with nonmarginal projects.
