EDWARD JAY EPSTEIN's The Rise and Fall of Diamonds is the most entertaining study of the basic us -gullible, greedy, vain, Everyman -since Harold Rhoden came out in 1980 with his matchless account of the Howard Hughes will forgery trial.

Of course, the same material is to be found in David Koskoff's The Diamond World , but Koskoff smothers the drama in too many details. His book often reads like an authorized industry history, only now and then catching fire, as with his profile of Harry Winston, the Jewish high-school dropout who had the "savoir of Prince Michael Romanoff himself" and became the world's most renowned peddler of the big-big diamonds.

With Epstein, the story is always fast and sparkling, swinging widly from the larcenous to the farcical and often combining to two. A good place to start is in the Central African Republic, circa 1977, where Albert Jolis holds a diamond mining concession. President Bokassa has just made himself emperor and rechristened the cuntry the Central African Empire. For the coronation, Jolis is instructed to provide a "very large diamond," and the instructions are given in such a tone as to imply that if he fails, he will lose the concession.

Jolis is in trouble. He can't afford to give up an honest-to-gosh super-size diamond. So he offers a super-size trick instead.

"One of his assistants," writes Epstein, "had found a large chunk of industrial diamond bort, weighing nearly seventy carats, which curiously resembled Africa in shape. This piece of black, poorly crystallized diamond would ordinarily have been crushed into abrasive powder, and as such would have been worth about $2 a carat, or $140. Jolis instead ordered that this large diamond be polished and mounted on a large ring. He then had one of his workmen set a one-quarter carat white diamond at the point in the black stone that would coincide with the location of the capital of the Central African Empire. Fianlly, Jolis placed the ring in a presentation box with a certificate stating that the diamond, which resembled the continent of Africa, was unique in all the world."

That certificate, plus a cooperative world press that reported the diamond (which had cost Jolis less than $500) was worth over $500,000, completely satified Bokassa. "When the Emperor of central Africa met Giscard D'Estaing, the president of France, he extended his black diamond to him as proof of his royalty."

Hahaha! The pompous politician had been hoodwinked by publicity and his own conceit. As Jolis later said of the coronation bauble, "It's a priceless diamond -as long as he doesn't try to sell it."

But before snickering at the since-deposed Emperor Bokassa, you should know that he was no more gullible than the millions of supposedly sophisticated Americans who buy, o wear, diamonds the value of which depends almost entirely on the perception of the buyer, a perception that has been developed by perhaps the most insidious and most effective advertising campaign in history.

Americans are the biggest suckers, perhaps because we take advertising so seriously. We buy two-thirds of the world's diamonds. Our closest rivals are the Japanese, eager to mimic the West. before Pearl Harbor, diamond engagement rings were virtually unknown in Japan; today Japanese spend as much as Americans, per capita, on courtship stones.

The diamond myth -or myths, for the gems are set in a cluster of them -is chiefly the creation of the advertising agency, N.W. Ayer, which has had amazing success in persuading everyone from Queen Eizabeth to high school teachers to shill for the industry. The peak of Ayer's genius was reached in 1948, when one of its copywriters produced the slogan "A Diamond Is Forever" to immortalize a stone that, in fact, says Epstein, can be "shattered, chipped, discolored or incinerated to an ash."

The slogan also implies that the value of a diamond is everlasting, but both Epstein and Koskoff take pains to warn diamond owners that if they try to resell their gems, they are in for an unexpected and illumninating experience.

This is illustrated by the sad history of Stanley Mark Rifkin, who jimmied the computers at the Security Pacific National Bank in Los Angeles to steal $10 million, most of which he spent on Russian diamonds. But he found that no dealer wanted them. After Rifkin was caught, Security Pacific tried to sell the diamonds. It had almost as much trouble as Rifkin in unloading them, and it did so only at a considerable discount.

Why would the dealers want to buy your diamond? They've got more than they need already. The reason the worldwide diamond monopoly was set up in the first place was to restrict supply to maintain artificially high prices.

Behind the monopoly is a cartel known as De Beers, founded a century ago by Cecil Rhodes, who went to South Africa with only one goal in life: to expand the British empire (which would include luring the United States back into the fold). That plan didn't work out, but he did succeed in instilling a ruthlessness in the diamond business that has survived down to the present. You will be interested in Epstein's account of how the diamond industrialists used World War II to unload their Depression-era surplus; although Hitler would have had to quit fighting much earlier if he had run out of industrial diamonds, somehow the supply from Africa never dired up for him.

Both Epstein and Koskoff take us on wideswinging tour of the world's diamond mines and markets, and the basic material is fascinating. But Epstein has the advantage. As shown in his studies of the Kennedy assassination, Epstein has a marvelous talent for sticking to the story and conveying a tension and mystery. At one stopover, he writes of a James Bond-like setup: "Inside the forbidden zone is the city of Oranjemund. . .and the vast mining area alongside of the Atlantic Ocean," a 200-mile long beach littered with pure gem diamonds, protected by spy computers, a constant helicopter partol, Alsatian guard dogs, barbed wire fences, and the Namib Desert with its 1,000-foot-high sand dunes, "one of the most inhospitable areas on earth." The miners here are in a constant battle with the ocean, behind a 10-story high, ever-crumbling dike. The scooping is done with a machine longer than a football field.

The heyday may be over. With the super-size stones getting harder and harder to find, some of the romance is fading. And diamond monopolies are not forever. Since 1970, more than half the diamonds produced have been man-made, beyond the control of De beers. Most are industrial diamonds, with General Electric the chief manufacturer, but man-made gem diamonds are increasingly available and popular. Madame Wellington's dominate the market, again because of publicity, but the best of the fakes, says Kiskoff, are Korean and Taiwanese CZs (cubic zirconium), and they are so good that if you toss some of the fakes into a pile of real diamonds, experts wuld have trouble picking them out. Not bad, for under $10 a carat. As Anita Loos might have said, CZs are a poor suitor's friend.