First, they not rare. At least not so rare as the diamond merchants let on. Nor high rare to deserve what they cost.
Not long after Cecil Rhodes (namesake of Rhodesia) founded DeBeers, he began the practice of hoarding the majority of what they mined in order to keep the prices jacked up. In fact he founded an international diamond cartel that remains in operation today, one of the world's few cartels that hasn't been driven out of existence. And he coached all members of the cartel to follow suit and only go to market with a tiny portion of what they had mined. Make more by selling less.
Known diamond reserves world-wide are 2.6 billion (with a "B") carats. 570 tons. Depending whose math you believe, between 12 and 30% of all mined diamonds are gem-quality, meaning there's something between 70 and 170 tons in gem-quality diamonds in known locations just waiting to be dug up.
And if gem-quality diamonds are only 8x rarer than industrial diamonds, how do they manage to command hundreds of times the price?
Besides hoarding at the mines, there's also collusion and price-fixing among the cartel's wholesalers (it wouldn't be much of a cartel without price-fixing, n'est-ce pas?). Because as long as they all hold the line, you have no choice but pay their extortion ... or go without. And retail mark-up is at least 100%, usually nearer to 200%.
It's also a myth that the diamond has long been the traditional stone for an engagement ring. At the start of the 20th Century, there was no clearcut answer as to whether an engagement ring needed a stone of any sort, much less a diamond. Then came the Great Depression and, like many merchants of luxury goods, DeBeers fell on hard times. They might even have gone under, or at least resorted to abandoning their hyperinflated pricing structure, if they hadn't hit on a master stroke of advertising in four simple words.
The obvious implication being that if you want your marriage/romance to last forever, a diamond is the only suitable "quid pro quo" when asking for her hand.
It's nothing traditional, and Jack and Dianne didn't come up with this nonsense on their own. They got it from a DeBeers ad campaign.
DeBeers also created the myth that a man should spend two month's salary on a ring for his betrothed. Which now usually gets retold as at least three, sometimes as many as six months, depending who's doing the re-telling.
It's been called the greatest ad campaign of the 20th Century. It both saved DeBeers and entrenched in the American consciousness the sense that you were "cheaping out" on the one you loved if you didn't spend more than you could afford on a rock that neither of you could tell from cut glass.
And anybody who recommends buying anything that the end user can't determine the authenticity of could only be a salesman. Or a politician.
There's about 7 million carats of man-made diamonds being grown in laboratories each year (versus 140-150 million carats of naturals being dug up). At the atomic level, man-made and natural diamonds are identical, both a face-centered cubic Bravais lattice of pure carbon. But man-made costs substantially less than a natural stone of the same color, cut, clarity and carat weight. And diamond-making is still in its infancy. There will be a great deal more of economy of scale to come, meaning the price advantage of lab-grown will continue to increase over all our lifetimes.
DeBeers and their ilk hope to hold on to their monopolistic cartel by pushing the concept that there's something inherently unromantic about a lab-grown diamond, presumably because there's some romantic attachment to the process of prospecting, discovering and mining the natural variety. But the simple fact is 99.9% of diamond-owners couldn't tell what they've got from a cubic zirconia if the lives of their children depended on it, much less whether their diamond came from a hole in the ground in South Africa or a laboratory on Long Island, so I hardly see the point.
Better still, ditch the diamonds altogether. Buy a white sapphire and spend the difference on a honeymoon in Tahiti.