The Law of Diminishing Return
Tue, Feb 12, 2008
I hate to break this to you all, but when your parent says “Too much of a good thing is a bad thing!”, believe it or not, they are right. Well if you take into account the evil “Law of Diminishing Return”. Here is the definition:
“Sometimes referred to as variable factor proportions, law of diminishing returns states that as equal quantities of one variable factor are increased, while other factor inputs remain constant, ceteris paribus, a point is reached beyond which the addition of one more unit of the variable factor will result in a diminishing rate of return and the marginal physical product will fall.”
English translation: There is a point where, when adding one more item (food, cloth, girlfriend/boyfriends), it decreases your “marginal” utility(happiness).
For example, you love ice creams, so you bought 3 cones of vanilla with sprinkle. It was the best ever! Then you bought a fourth one. It turns out to be not as good as the first three,but it ws okay. Then you bought a 5th one. That didn’t taste as good either. Then you bought a 6th one, that tasted even worse. Actually, it made you feel sick. That is the Law of Diminishing Return working at its best. The first 3 were good but the rest just made you feel worse because you were already full from the first three.
So, prove me wrong, what is something that will not be affected by the Law of Diminishing Return?
Tags: diminishing, eocnomics, law, return, returns
February 12th, 2008 at 10:49 am
Each further moment of being.
February 12th, 2008 at 10:54 am
Sex.
February 12th, 2008 at 11:35 am
@ Martin
Someday we all have to die
@ K
You have to get tired sooner or later
February 12th, 2008 at 12:10 pm
Oxygen…Water…The smell of Beautiful by Estee Lauder… Laughter…
=)
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February 12th, 2008 at 12:52 pm
Sushi.
StanHayes’s last blog post..Keeper Question, From Me to You
February 12th, 2008 at 1:09 pm
Practice
February 12th, 2008 at 1:25 pm
@ Tim
If this was a contest, you would have won. Good one!
@ Ohio realtor
I think you can die from over hydration. Also from too much Estee Lauder. haha
@ Stan Hayes
I LOVE SUSHI! How did you know!
February 12th, 2008 at 3:17 pm
Money, land… (wealth)
February 12th, 2008 at 3:27 pm
The concept of diminishing marginal returns would be better explained if you specifically considered the utility gained from each scoop of ice cream.
If a friend offered you a scoop of ice cream, it might make you really happy. Then if you ate that scoop, the friend may offer another. The second scoop is nice, but it’s not as exciting as the first. A third scoop is still good, but you’re not as excited about going from 2-3 scoops as you were from 0-1. The process continues until you’ve had so many scoops that when the friend offers, you just say no.
February 12th, 2008 at 3:33 pm
The Law of Diminishing Returns is a theory of economics, not of human behavior and taste. It may be OK to use a human analogy to get the point across in teaching the theory, but that does not mean the “law” applies to us. Just because ideas from one domain can enlighten another domain does not mean that the laws can be universally applied. (Moreover, ceteris paribus is a theoretical construct that is arguably a fiction in the real world.) Just because one falls asleep from exhaustion after the nth orgasm doesn’t mean the (n+1)th would be any less pleasurable. (In Japan, don’t most people eat Japanese food every day fro there entire lives? Etc.) It could also depend on the rate of occurrence: Is the ice cream eating being repeated every minute, hour, day, week, month, etc. Such laws as this have boundaries which we too often ignore at our peril.
February 12th, 2008 at 3:33 pm
@ Non-Asian Economist
Thanks for dropping by and helping further explain the idea of diminishing marginal returns!
@BG
I was just having fun extrapolating the idea of the law of diminishing return but your points are very valid.
February 12th, 2008 at 3:47 pm
cash money
February 12th, 2008 at 5:45 pm
@ Nhuong Son
And that last moment won’t be any less enjoyed than the first, hopefully.
February 12th, 2008 at 5:51 pm
Can I just have the remaining ice cream?
That law does not affect me when it comes to my appetite.
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February 13th, 2008 at 12:16 pm
Who doesn’t love sushi? Seriously, who?
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May 27th, 2008 at 10:50 pm
I would have gone with air or oxygen but someone beat me to it. Unless you imagine being in a windtunnel, we never get tired of air because we need it. In fact we almost never think about getting enjoyment out of air. You might say we get 0 enjoyment out of every breath. Or an equal amount of utility.
I also wonder about substances that are at first unpleasant but you then get used to. Nasty tasting medicine, vodka, buttermilk–everyone has their own examples. Eventually you enter a diminishing curve, but at least at first your returns increase.
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December 5th, 2008 at 2:04 am
immortality.
June 15th, 2009 at 1:05 am
Thank you. You have helped someone more than you could know.