ABSTRACT
The musical Urinetown presents a businessperson who deals with a water shortage by instituting a toilet tax. The lyrics go “I run the only toilet in this part of town, you see. So, if you’ve got to go you’ve got to go through me.” If someone doesn’t pay the toilet tax, he or she is banished, hence the “Privilege to Pee.” This song allows us to examine the diamond–water paradox. The paradox is that water is essential for life, while diamonds are unnecessary. Because of this, demand for water is much greater than the demand for diamonds. But water is free (or close to free), while diamonds are quite expensive. The paradox is solved by examining both the demand curve and supply curve. The supply of water is so large, at least in most of the developed world, that the price for water is essentially zero. The supply of diamonds is quite limited which is why the price for diamonds is high.
