In the 1940s, De Beers recommended that the groom should spend two months of his salary on the ring for his betrothed. (De Beers, which controls much of the diamond industry, didn't discourage grooms from paying more.) Today De Beers is more circumspect, saying only that the groom should establish his budget based on his income and what he wants to spend. Meghan O'Rourke, writing in Slate in 2007, brought economics into the picture, and argued that the tradition of the man giving his fiancee an expensive ring as evidence of his commitment to marry her replaced her right to sue him for breach of promise of marriage. She made a Galbraith-style economic argument: lots of policy, but no equations.
Roger Staiger, a noted real estate consultant, lecturer at Georgetown University, and adjunct professor in the graduate school of Johns Hopkins University, has now introduced mathematics into the question. Writing in the current issue of Live Valuation, a magazine for the appraisal industry, Professor Staiger suggests treating the cost of the engagement ring as equivalent to payment for an option to enter into a transaction at a fixed future date, and then applying the Black-Scholes theory of option pricing to compare the price of the ring to the present value of the bride's expected future earnings. (Black-Scholes is the most common method of valuing options, and used by public corporations to assign values to their outstanding grants of stock options.) He used Jessie, one of his students, newly married to Tom, as an example. His surprising result: De Beers would recommend that Tom pay $18,300 for Jessie's engagement ring, but the Black-Scholes valuation method sets a fair economic value for the option to marry Jessie at $140,000. Tom got a bargain, and Jessie now has the evidence to prove it.