Final answer:
Adam Smith is the man who contrasted value-in-use and value-in-exchange to explain why diamonds are more expensive than water, illustrating the 'paradox of value' in his book The Wealth of Nations.
Step-by-step explanation:
The man who contrasted value-in-use and value-in-exchange to explain why diamonds are more expensive than water was Adam Smith. Adam Smith, known as 'The Father of Capitalism,' discussed this concept, known as the 'paradox of value', in his seminal work, The Wealth of Nations. Smith explained that even though water is essential for survival and thus has a high value-in-use, it is abundant and therefore has a low value-in-exchange. Diamonds, on the contrary, have little value-in-use in terms of survival but are scarce, making their value-in-exchange high. This distinction helps understand why prices do not always reflect the utility of a commodity.
Adam Smith's key contributions also extended to the foundation of liberalism and the concept of a free-market economy. He argued that a laissez-faire approach to the economy, one where the government had minimal involvement, allowed the 'invisible hand' to balance the supply and demand of goods and services, ultimately benefiting the society at large. His insights remain influential in the field of economics today.