[markisus]

With respect to your first point, we should all make sure the products we buy are ethically produced. But this has no bearing on the question of whether it's rational to assign higher prices to naturally produced diamonds. There are many other things that are unethically produced, that people pay high prices for, and where those prices are viewed as sensible (eg. oil, smart phones, opioids).

As for your second point, there is a large marketing component for most things that are bought and sold, including art and memorabilia. You say that for diamonds, the value is fabricated. But I believe the fabrication of value creates real consequences. It's not trivial to coordinate the action and common knowledge of an entire population. If you do it right, it creates a new Nash equilibrium. If someone then gifts you a "natural" diamond, it is irrational to sell it at the "synthetic" price. Your buyer might even be a diamond dealer who also believes the natural-synthetic thing is a marketing scam. The whole population can even know the whole situation is fabricated. But unless they can all coordinate and change the market price in unison, it doesn't make sense to deviate from the equilibrium.

[isykt]

> But this has no bearing on the question of whether it's rational to assign higher prices to naturally produced diamonds.

Sure it does. In economics, it’s called a negative externality, and it’s a common topic when discussing pricing the output of industrial processes.

>But unless they can all coordinate and change the market price in unison…

They don’t need to. We have governments that do that, through mechanisms like taxes and tariffs.