In real life, of course, no human being ever chooses between the world's supply of diamonds and its total supply of bread. Rather, certain stocks of these goods are already available, and the utility of another diamond or another loaf of bread is affected by the severely limited supply of diamonds, compared with bread. For many individuals, consequently, another diamond would have far higher marginal utility than another loaf of bread. Because the concept of marginal utility remained unknown, the classical economists failed to grasp how the rarity of diamonds might influence their utility.

Since the value of diamonds seemed unrelated to their utility, these early thinkers concluded that their exorbitant value resulted from the fact that they were costly to produce. More generally, they argued, value is determined by the physical costs of production, and in particular by labor costs. Karl Marx, who offered the first volume of his Das Kapital in 1867 (i. e., just before the marginalist revolution in economics), based his system on this same fallacy, inherited from classical economics. Marx further noted, however, that labor was essential to every stage of production, concluding that value was determined by the "stored" value of labor. It may be speculated that if marginal utility had been known to economists a few years earlier, the world might perhaps have been spared the large-scale disasters of applied Marxism in the twentieth century.