"Value in Use" versus "Value in Exchange"

Why are diamonds more valuable than water?  Adam Smith explained this in his Wealth of Nations (1776) - -

The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys.  The one may be called "value in use", the other, "value in exchange."  The things which have the greatest value in use frequently little or no value in exchange; and on the contrary, these which have the greatest value in exchange have frequently little or no value in use.  Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it.  A diamond  on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.