The big driver for small diamonds (< 0.25 carats) is that the price of cutting/polishing diamonds has plummeted in the last 10 years. Before then, diamonds were predominantly cut and polished in Antwerp and Tel Aviv. The price (measured in $/carat) was around $80. 10 years ago, Surat, India started to dominate the industry, and the price fell to $10. It's common in Surat for a family to get a bag of rough in the morning from a company, take it home and have the entire family cut and polish the bag, and return it for cash at the end of the day. The result of this price drop is that small diamonds suddenly become profitable.

There's been other references to the Atlantic article from 1982, but the diamond industry has changed tremendously in the last 10 years. There's 2 good books to read about the recent changes: will find their names and edit this post with links.

* http://www.rough-polished.com/en/analytics/77889.html

Here's one book - http://www.amazon.com/Diamond-History-Cold-Blooded-Love-Affa...

Here's the second book - http://www.amazon.com/The-Heartless-Stone-Journey-Diamonds/d...