I think this is the cultural distinction you're missing -- married American women typically wear both their engagement and wedding ring their entire lives, and the engagement ring is usually the more ornate/expensive one (which might be due to the De Beers marketing throughout the 20th century this article discusses).
And obviously this works without diamonds too.
It's not even culture that somehow organically came from the needs or habits of people. It's literally just a marketing scheme.
Although one tip I'd give to anyone getting married, get a pair of $18 rings for travel and what not. If one slips off while swimming in the ocean, it's ok.
Perfect for construction work, travel and sports like lifting, climbing etc
(De Beers are still the big baddies though)
If you just finished your college, sit on a big pile of student loans, work in your first job and then spend several months of income on a shiny rock, then that is a bad financial decision, no matter whether you love diamond rings or not.
Going into unaffordable debt for a trinket is a story of beautiful romance to you? That's just profoundly sad.
Externality exists. The 40K$ diamond ring goes to some of the worse people in our society.
Also, there is a deep body of economics and psychology literature describing how individual spending decisions are sometimes suboptimal in predictable ways, particularly that we under-value experiential purchases.
It doesn't contradict general "live and let live" principles to think that cultural emphasis on positional goods is bad, nor that individuals might be better off if they made different consumption choices.
Anyone trying to hook up will look for a ring as part of the non-verbal social clues.
Rings being expensive or not is a different matter.
If they don't "get the message" I start casually discussing my children.
That being said: I love the tradition of engagement and wedding rings. It's not just about preventing cheating. I bought my wife a moissanite engagement ring because we both wanted to follow the tradition, and we both understood that diamonds are a marketing gimmick to convince suckers to part with large sums of money.
I spent a sum of money that we were both comfortable spending, and we're both very happy with our purchase. My wedding band is made out of precious metal, and I love it. Other people I know wear cheap bands from Amazon and are happy with them.
If you want to be in a lifelong relationship with someone, it's important that you're both on the same page about these kinds of traditions. You don't have to follow them, but if your partner wants to, or values them, it might be worth it to play along to keep them happy. (As long as you're spending money that you're both comfortable spending.)
It's all thanks to more than 100 years of marketing campaign and tight control of supply of diamond by De Beers. I have to give it to the ingenuity of De Beers - they got Soviet Union to agreed to a supply deal after Soviet Union found huge diamond mine that could have supplied the market with dirt cheap diamonds for hundreds of years! So, I'm very happy that Chinese entrepreneurs do not give a shit about De Beers and managed to figure out how to mass produce lab-made diamonds cheaply (yes, the process was invented and greatly improved by the west, but it was China, specifically the manufacturers in Henan Province, that didn't succumb to De Beers' heinous control, and gave De Beers a huge middle finger).
It's funny that the traditional diamond industry started to argue that these lab-grown diamonds were too pure and lacked the impurities that natural diamonds have. And what is the response of the Chinese manufacturers? They laughed, as adding impurity to a lab-made diamond can be easy and precise.
Personality, I hate the kind of consumerism and irrationality driven by De Beers. I'm very happy to see De Beers destroyed.
I guess they're doing that because humans have a long history of idolising old times and old imperfections. We praise analog photo grain, or analog audio noise. Industries from clothing brands to guitar manufacturers release artificially aged products.
Then again, adding imperfections in "post production" seems to be the status quo.
Regarding the wedding ring, I can understand slightly better how someone would put a bit more money into that, considering that you wear it for life. But there are so much better options than buying a shiny rock. Why not go to a goldsmith and pay 1000$ for a workshop where you forge your own rings? That will result in a lasting memory of a nice event, for a fraction of the cost, instead of throwing thousands of dollars out the window for a shiny rock that you simply buy at the store. Or maybe you don't even need gold? In my opinion, silver, titanium or maybe something like steel combined with carbon fibers looks better anyways.