"The diamond invention -- the creation of the idea that diamonds are rare and valuable and are essential signs of esteem--is a relatively recent development in the history of the diamond trade," writes Edward Jay Epstein in The Rise and Fall of Diamonds: The Shattering of an Illusion ($14.95), to be published later this month by Simon & Schuster.

Until huge diamond mines were discovered in South Africa in 1870, gem diamonds were rare. Since the opening of South African mines, the diamond's value--which depends on its scarcity--has been maintained artificially, Epstein claims, by the South Africa-based De Beers cartel, created in 1888 to prevent diamonds from becoming only semiprecious stones.

De Beers retained the N.W. Ayer advertising agency in 1938, writes Epstein, to figure out a way to get U.S. citizens to buy more and larger diamonds. Deciding that its best bet was to romanticize the diamond, Ayer launched a 20-year campaign to convince the American public--De Beers' largest market--that diamonds were a necessary part of the engagement process, a proof of love.

"Even though diamonds can in fact be shattered, chipped, discolored, or incinerated to ash," says Epstein, "the concept of eternity perfectly captured the magical qualities that the advertising agency wanted to attribute to diamonds."

"A Diamond Is Forever," under a picture of young lovers, became De Beers' official slogan, lending diamonds the aura of both "romance and legitimacy."

A similar campaign launched in Japan in 1967 had remarkable results: In 14 years, the percentage of engaged Japanese women who received a diamond engagement ring soared from 5 to 60 percent, and Japan became the second largest market for diamond engagement rings.

Meanwhile, diamond mines discovered in Siberia in the late 1950s produced a flood of tiny diamonds, which soon came under the De Beers monopoly. Thus was born, says Epstein, the "eternity" or anniversary ring, composed of many tiny diamonds and marketed--indirectly--to older women in the name of "recaptured love."

Diamond stockpiling by Israeli dealers, the discovery of diamonds in Western Australia and the mail-order marketing of loose "investment" diamonds by fraudulent investment firms have all more recently, according to Epstein, un dercut the power of the De Beers group. Their diminished control of the diamond market, he says, "may bring about the final collapse of world diamond prices."