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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
Good. Totally true. Also good comments, even the wiseass ones. And as you say diminishing returns pertains to economics. Graduate economics was Econ 101 with more math and statistics, which obscured rather than illuminated, and since macro economics, which is accounting not economics, was great for using math and statistics it dominated American economics. The only thing they didn’t teach when I went to school was Hayek. So it took me 30 some years of looking at real economies to learn what I might (strong doubt here, the math was cool and made me think I was learning powerful stuff) might have learned with a couple of lectures on Hayek.
For me, I use a documentation program that replaces paper. It’s extremely complex, compared to the older paper system, but it has such tremendous utility.
It is all click-the-box and fill-in-the-blank from drop down boxes, but hand-typing the free-style narratives which explain things in exceptional clarity, are second-class add-ons that no one apparently reads.
The program allows lawyers, accountants and sales staff to generate oodles of reports (not to mention a whole new department of compliance staff to generate reports requiring corrections) but it takes four times longer for the licensed professionals to satisfy the program, and gives 1/4th the clarity to the information recorded.
Somebody seems to be happy, but it’s not the people doing the actual job.
I did consider “you think I’m drunk? Heck; lookit that guy over there.” but couldn’t quite formulate it properly.
What if you eat one piece of several pies, instead of several pieces of one pie?
I dunno. I guess there is a point of diminishing returns with alcohol, but the problem is it’s a moving target.
100% agree, and “LITTER” is a generously civil euphemism for the stuff found on the streets of our most liberal west coast cities.
I don’t know whose quote this is, but it expresses the diminishing returns issue for alcohol very succinctly: “It’s not that I want another drink. I want the first drink all over again”.
The first drink of the night, or the first drink ever?
I find it’s usually about the third drink that I want again.
If only we had a University of Alcohology to determine these things…wait a moment, they’re almost all the University of Alcohology…
Too bad no one’s ever quite figured out how to use this knowledge. I was watching “Yes Prime Minister” tonight, and they were discussing the Department of Education. Humphrey said that one of the things that the Department was for was planning. The prime minister responded, “You mean they planned the way education is today?” I feel the same way about the economy. And don’t tell me how it’s humming; tell me about what we’re going to do with $20 trillion in debt.
Possible counter examples:
1) Meth
2) 2-year old’s love for certain ear-worm songs. But not entirely observed, as Grandma’s patience wasn’t inexhaustible after all.