Q:

How do Marxist economists solve the Diamond-Water Paradox?

For class surveying different economic systems, I read a book on Marxism and its core beliefs.  As I read, I came to learn that the Marxist view of economics depends heavily on the Labor Theory of Value since Marx believed that the value of a good was determined by the amount of labor.
But, from what I understand, the economic community no longer accepts the Labor Theory of Value due to its inability to explain the Diamond-Water Paradox.
How is it then, that certain economists still adhere to the Marxist view of economics?  How do they have Marxism explain the Diamond-Water Paradox?  

A:

The Labor Theory of Value has been replaced by the theory of Marginal Utility, which was already accepted by Marx time. In fact he acknowledged:

"nothing can have value, without being an object of utility"

-Wikipedia: Marginal Utility - The Marginal Revolution and Marxism
Marginal Utility addresses the diamond - water paradox by explaining that the more of a resource or commodity one has ready access to, the less one needs access to even more. The declining marginal utility means that because water is nearly ubiquitous and easily accessed it has very little "value" per unit to an individual because they know they have access to many many units.
"Modern" analytical Marxists, including John Roemer have built a strong foundation (if somewhat heterodox) based on the theory of marginal utility.

A:

A Marxian view of the Diamond-Water Paradox would be that diamonds are scarce and expensive BECAUSE they require a lot of labor to produce (at the margin), while water is cheap because it can be produced with relatively little labor (anyone can go down to the river and draw a bucket of water).

