In the old days when people buy diamonds, they have to equip themselves with vast knowledge of the jewelery so that they won’t get rip off by the shops. They have to know how to determine the grade of the diamond, learn how to examine the rock in order to determine the fair value they should pay. Now, diamond is getting more and more common, it has moved down market from luxury goods to commodity. The economist’s definition of commodity is anything that is replaceable by another indistinguishable items with the same quality. We don’t have to know anything about the physical appearance of the diamond, we just need to know how to read the certification of the diamond. Each diamond has a bar code imprinted by laser, which corresponds to its certification. All measurements of the diamond required to determine its value are listed in the certification. Then price of a diamond is easily found in the open market by comparing the price of similar diamonds. The certification system of diamond lower the trading cost of diamond. As long as the consumers have confidence in the certification agency, there are less room for market manipulation by the middle men in diamond trade.
I wonder is it possible to set up similar certification system for jade, pearl and other jeweleries. It is more reliable to price the jewelery with objective number than subjective impression on how good the jewelery looks. On a second thought, why jewelery should have a price after all? They are practically useless, so they have only psychological demands. People want jeweleries only because other people want jeweleries, not because anyone need the jeweleries. If jeweleries are just a proxy for people to show off how rich they are, wouldn’t it more efficient to simply show off your net worth? If you are rich enough, you don’t need any jeweleries, your identity ellipse whatever you wear. If you are not that rich, why waste money on jeweleries trying to impress the lesser minds? Why not spend the money on yourself instead?