Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
Diminishing Returns
Economics, as I’ve come to believe, is a vastly useful branch of knowledge that can tell you amazingly useful things about the world, as long as you don’t try to pin it down. Matter of fact, I find that the nickel version of a concept will, if you treat it right, give you more benefit than the whole rest of your education on the subject. What’s more, Economics has a concept that tells you exactly that; the idea of Diminishing Returns.
Like a great many things Diminishing Returns can most easily be understood in terms of a pie-eating contest. A single piece of pie is divine. A second piece of pie is a bad idea for a couple reasons, but it still tastes just about as good as the first piece. By the third and fourth you’re getting sick of all this sweetness. By the time you’re six pies in you wish you’d never heard of the confection.
Mankind’s natural assumption is that one plus one equals two. If you get one piece of pie’s enjoyment out of your first piece of pie then your second piece should also give you one piece of pie’s enjoyment, right? More pie = more happiness. That’s not how it works out in practice though; your second piece is less yummy than the first, and the third is less yummy than the second. By the time you’re a serious contender in a pie eating contest the numbers go negative; the last thing you want is to eat a 23rd piece of pie.
(This, by the way, is the “as long as you don’t try to pin it down” part. Precisely how much does the value of pie drop from one piece to the next? It’s not a useful question; even if you figured out how to measure it there’s no guarantee that that precise measure will be valid at the next pie-eating competition. Still, we can all understand not going back for that fourth piece.)
People tend to get as far as “some things have a diminishing returns … thingy” and then leave it at that. There are more important things to worry about. Like pie. The truth of the matter is, though, that nearly everything in our lives hits that diminishing returns curve, and sometimes hits it hard. Heck, I bet you I can come up with 20 separate examples just off the top of my head. Here we go:
- Doubling teacher’s salaries will not double the quality of education the kids receive.
- Doubling school’s budgets won’t double teacher’s salaries.
- An hour of the news every week makes you well informed. Twenty more hours only makes you neurotic.
- Oreos are pretty good. Double Stuf Oreos are decadent. Mega Stuf Oreos doubly so.
- Reading a book of chess strategy will do more for your game than reading the next three books.
- Every additional feature added to a program makes it a little more powerful and a lot less useful.
- One bumper sticker is fine. The rest aren’t likely to persuade.
- Rip Van Winkle didn’t wake up stupendously refreshed.
- First prize is a brand-new Cadillac. Second prize is a set of steak knives. Third prize is you’re fired.
- You weren’t really going to get anything done in the last hour of the workday, were you?
- Learning to read is immensely useful. A Ph.D. less so.
- Lying about your grandmother’s funeral will get you a day off from pizza delivery. Lie about her sixth funeral and people will look at you askance.
- If you’re spending as much energy now protesting incorrect gender pronouns as people did 60 years ago against black voter suppression then perhaps you should reevaluate your priorities.
- It’s a hassle having a girlfriend. Having two will get you killed.
- Learning one language is difficult. Learning five is not five times as difficult. Unless you count keeping them separate in your head.
- Learning one language expands your view of the world. Learning five doesn’t do nearly that much.
- Learning Klingon isn’t going to do as much for you as watching the original “Star Trek” did. Or, you know, qualify for the previous two points.
- Feeding the poor is a noble public service. Making sure the poor have access to free broadband internet is not.
- Preventing people from dumping trash wholesale into the ocean might do something for the environment. Banning plastic straws will not.
- One Ricochet post on a subject is interesting. Once you’ve penned five, you’re pushing your luck.
Okay, maybe those examples get worse in volume. If only I could think of a way to explain that…
Published in Economics
Wait, STOP! Triple stuffed Oreos? Where did you find those???
A buddy picked them up. Aldi’s?
You can learn more useful information about human behavior by studying economics than you can with five or six years studying psychology.
Every film studio faces diminishing returns with sequels. Most series of films aren’t “Lord of the Rings” or Harry Potter; in an age of franchises that never die, from Bond to Shrek, it’s easy to ignore the garden variety, squeeze-out-one-more-buck sequel, which will probably make 20% less with each iteration. Naturally, the studios know that, so ordinary sequels have sharply diminished budgets. Naturally, the audiences know the sequel won’t have the original stars and is likely to be a cheapie. So by “Revenge of the Nerds 4”, you are probably looking at an audience of a quarter to a third of what the first one did, if that.
Public investment issues also involve diminishing returns. Exaggerating the numbers for the sake of simplifying the content, the Nixon era’s pioneering EPA was able to clean up a lot of genuinely horrible cases and reduce air pollution. At that time, conservatives should acknowledge, spending a reasonable sum to eliminate 90% of the problem was a sensible and popular thing to do. Nobody who remembers, as I do, what city skies looked like before 1970-75 or so doubts that the first wave of cleanups was overdue.
Then we moved on from solving 90% of the problem affordably to solving 9 of the remaining 10% more obtrusively and expensively. This was the back and forth struggle of the Eighties and Nineties.
Now we’re considering how to solve the remaining 1% at astronomical expense. Diminishing returns.
I don’t believe so, think it was Festival. I would also argue that they were insufficiently mega. Given that double has presumably twice as much frosting as a regular Oreo I would expect mega to have twice that. I didn’t measure the frosting but to the best of my knowledge I would say it’s about 2.5 times as much frosting as a standard Oreo.
Also I’m not seeing anything about “ribs with a side of ribs” in your list of examples.
That presumes you’re getting less utility out of your side of ribs. I’d like to test that one empirically before coming to any conclusions.
What if the horses in your horseburgers are horse-fed for that double juiced-in goodness?
I have quibbles on a few of the examples.
I don’t understand 6. If I can use the feature, I’m happy. Given the ability of program creators to explain things or my ability to get a clue, I often find myself eventually and unexpectedly happy. If I can’t figure out how to use the feature, I don’t really care, but am happy someone else might be made happy. Don’t see how it makes the program less useful.
Dear me, on 18. Substitute public library for free broadband internet (pretty much same thing these days, now that I think about it) and you contradict the saying: Give a man a fish and he’s fed for a day; teach him to fish and he’ll never be hungry again. (NOT as in my brother’s favorite joke: Build a man a fire and he’ll be warm for an evening: set a man on fire and he’ll be warm the rest of his life. My brother is a psychopath, by the way.)
Circling warily around 15 and 16.
And an example of my own. Offer one criticism and you might get away with it. More than that, just forget about being invited to the Christmas party.
@hankrhody,
Very refreshing article. You make Mises understandable! (And funny.)
I tried to be brief; you lose something after too many words (!), but here’s the essential bit. Most features you’re not going to use. However each additional feature makes the program larger, makes it slower, makes it more vulnerable to bugs and hacking and such. You end up with a thing like Adobe Acrobat where it takes three minutes to load when all you really want to do is read this pdf.
Might work for pie but it doesn’t work for bacon. More bacon is always better.
You say that but Matt had this 5 lb bag of bacon in the downstairs freezer…
I think I’ve said too much already.
Not anymore …
Wait, wait, aren’t those the freezers where they’re keeping Dr. Hunter and Dr. Kaminski?
Y’know just because Arahant’s gone doesn’t mean it’s a requirement that someone else starts up with the long pig jokes.
Or maybe I’m just too ready to believe that someone else is referencing long pig myself.
What I’m reading is it’s time to buy more bacon.
You’re not wrong…
A few examples off the top of one’s head can be enlightening and even hilarious, but twenty examples…
So diminishing returns?
Another example of Diminishing Returns.
I particularly like #11.
I would change #18 to read, “Feeding the poor is a noble service. Making sure they stay poor is not.”
This is all very subjective on what kind of pie. I’m not saying I’ve eaten an entire French Silk pie all by myself. (Then again, I’m not saying I haven’t.) But either way I’ve yet to find my enjoyment diminishing. My appetite maybe. French Silk is kind of rich. (It’s basically just butter, with some chocolate, a lot of sugar and a couple of eggs whipped in for structure.) But every bite is decadent.
Oh man, are you speaking my language.
The quest for “pristine” is the undoing of any environmental program. Money should only be spent to clean up something to the point where it would no longer be on the list of great concerns if evaluated now. Nothing will ever be pristine, but why should we ever think that is the standard? If the boat is sinking, you plug every leak until it is less threatening than a remaining one, not until that leak is perfectly sealed.
I wish the lefty environmentalists had more concern for LITTER, an obvious blight, than they do for global warming/cooling/whatever, a quixotic blight at best. (But a much more profitable one.)
Wait. I thought the adage was “Give a man a fish and he’ll eat for a day. Teach a man to fish and he’ll laugh at you and go find a Democrat who will promise to give him a free fish every day.”
Number 7 is spot-on. One bumper sticker is bad enough, but it might make you think. Once he’s past 3, he is written off as a crank. Or maybe just too needy than one can comfortably tolerate.
Arahant is gone??? Not for good, I hope!
Just taking a sabbatical.
21. Exercising once feels good, but doing it every day becomes awful.
22. Getting sober can help you get a grip on things, but being sober everyday after that…
I think there is something to this diminishing returns.