Talk:Diminishing returns/Archive 1

Does The Title
A law?== Require Cleanup? ==

100110100 12:15, 20 November 2006 (UTC)

I'm just beginign to learn economics and this is one of the most confusing wiki articles I've ever read, I notice it doen'st explain the CAUSE of diminishing returns

Not only does it not explain the law, it also ridicules the explanation of those who have tried.

Deleted 2nd paragraph of "A law?" section
That paragraph is:
 * For example, most people find that listening to the same piece of music over and over again during a day implies that each additional hearing is less pleasant than the previous one, at least after the initial stage of gaining familiarity with the piece. This is an example of diminishing marginal utility of the piece. (Case & Fair, 1999: pp. 135-137).

Perhaps it could be moved to another article or form the basis for a new article. 'Diminishing returns' in standard economic usage refers to a relation between a factor input (say labor) and output, not between consumption of a good and marginal utility. The deleted paragraph refers to the ""law" of 'diminishing marginal utility', which is different from 'decreasing returns'. Thomasmeeks 11:43, 2 January 2007 (UTC)

"Example" section
On May 7 at 5:00 PDT, User:Asrultraz removed the entire section under "A Simple Example" without warning. I personally think the section is valuable for introducing the concept, and does a reasonably good job at it, but it may not match the tone of the rest of the article. Still, if anything it is the "Arguments for Diminishing Returns" section that is vague and unhelpful. Does anyone else think that one or both of these sections should be removed or redone? Jediknil 06:06, 8 May 2007 (UTC)

Explanation needed
This article states what diminishing returns is and how it works, but then it doesn't explain WHY it works. Zero76 10:11, 17 June 2007 (UTC)

80 20 rule
Shouldn't this page mention the 80 20 (Pareto principle) rule? 77.99.57.229 (talk) 23:27, 20 November 2007 (UTC)


 * I don't see why, I think that is something unrelated.--151.65.233.84 (talk) 19:42, 11 September 2008 (UTC)

Additional example
If this article is ever expanded, I think it would be nice to have an example from statistics/signal analysis. Most counting problems (see e.g. Poisson distribution) have a variance sqrt(n) when counting n values, so the relative error scales with 1/sqrt(n). Similarly, when observing physical signals, the resulting quantity usually has a relative error that scales with 1/sqrt(observation time). If you thus want an error 10 times smaller, you need 100 times the observation time. Put otherwise, if you have already measured/counted a signal for 1 hour, adding a second hour improves your result by a factor sqrt(2)/sqrt(1) = 1.4. If you already have measured for 10 hours, one hour extra will only give an improvement of sqrt(11)/sqrt(10) = 1.05, or just 5%, a clear example of diminishing returns.--151.65.233.84 (talk) 19:42, 11 September 2008 (UTC)

fundamental Laws
Microeconomics is divided into two categories - consumer theory and production theory. The law of diminishing marginal utility is the fundamental law of consumer theory; the law of diminishing marginal returns, the fundamental law of production theory. If the law of diminishing marginal returns does not hold true production theory quickly unravels. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 05:54, 14 September 2009 (UTC)

Classical versus Neoclassical
The article notes that the law of diminishing marginal returns can be traced back to certain economists. Malthus is probably the most famous of those mentioned. Malthus was a classical economist. Classical economics incorporated a theory of diminishing marginal returns. However, the diminution of output was due to the decrease in the quality of the inputs. Neoclassical economics assumes that all inputs are qualitatively identical. Therefore the source of diminishing marginal returns cannot be due to the need to hire less productive workers as prodution increases. Neoclassical economics explains diminishing marginal returns as a disruption of the productive process due to "too many" workers - in other words the workers tend to get in each other's way - a rather thin explanation for the central law of production theory. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 10:06, 14 September 2009 (UTC)

In fact the law of diminishing marginal returns is based on two restrictive assumptions - that at least one factor of production is fixed in the short run and that demand and supply are independent. If either of these assumptions is incorrect the entire theory collapses. Are these assumptions valid? --Jgard5000 (talk) 10:15, 14 September 2009 (UTC)jgard5000. For a critique see Kleen, Debunking Economics (Zed 2004) UK ISBN 1 85649 992 8--Jgard5000 (talk) 10:58, 14 September 2009 (UTC)jgard5000

Different Concepts
"In economics, diminishing returns (also called diminishing marginal returns)." Diminishing returns and diminishing marginal returns are not the same thing. Diminishing marginal returns means that the MPL curve is falling. The additions to total output are successively smaller Total output is increasing at a decreasing rate. Diminishing returns means that the extra labor causes output to fall which means that the MPL is negative. In other words the change in output per unit increase in labor is negative and total output is falling. Perloff, Microeconomics, Theory and Applications with Calculus (Pearson 2008) at 178.--75.202.30.20 (talk) 18:26, 18 September 2009 (UTC)jgard5000 As Perloff points out no rational firm would operate in a region of diminishing returns because the firm could increase production and profits by reducing its labor force.--75.251.212.165 (talk) 11:33, 19 September 2009 (UTC)jgard5000

New Title Needed
For the reasons above stated the title should be changed to Diminishing Marginal Returns.--75.251.212.165 (talk) 11:36, 19 September 2009 (UTC)Jgard5000

"Law" or "Theory"
Law or Thoery? When I studied economics, we used to refer to it as Theory not law.

In my opinion: Diminishing marginal returns is a law, and I will attempt to disprove the fax machine example. The author is using Metcalfe's law, which says the value of a network increases as a square to the number of users. The more people who join a network, the law goes, the more valuable the network is. Well, is it not possible for the network to get so big and cumbersome it loses its value? Perhaps one could imagine a scenario where 500 googols of people had telephones. Perhaps the phone numbers would at that point get so large it would take a year to dial them. What would be the value of that network? No matter what network you use, you will have to use some form of notation to reach others, which could get out of hand on a cosmic scale. So, therefore, I argue that Metcalfes' law diminishes at a very tiny, tiny, tiny fractional rate but will indeed fall to the law of Diminishing Marginal returns at some point. —Preceding unsigned comment added by A2470 (talk • contribs) 05:54, 3 June 2008 (UTC)

Economists make assertions from which they derive refutable hypotheses that are subjected to empirical testing. The law/theory distinction is meaningless.--Jgard5000 (talk) 22:01, 28 September 2009 (UTC)jgard5000

It is theory but true
Each variable resource added to the fixed resource --- at a certain point the output/returns will decrease. It is a simple theory and it is true. If it were not we could supply the world with corn from only a 1000 acres of land. —Preceding unsigned comment added by 68.166.201.156 (talk) 03:45, 25 January 2008 (UTC) The point is whether any factors should assumed to be fixed in the short run. If there is an increase in demand the rational manager or farmer in the example would acquire buy or lease additional "fixed" factors.--Jgard5000 (talk) 11:15, 29 September 2009 (UTC)jgard5000

lacks objectivity
The article lacks objectivity. It calls the reasoning of economists attempting to explain why the "law" works as "thin" and "trite." There are also a few typos (missing periods, singular when should have been plural, etc.) --Sgduncan (talk) 11:43, 2 June 2010 (UTC)


 * Yeah, those comments were egregious, I've removed them. C RETOG 8(t/c) 19:06, 2 June 2010 (UTC)

Returns to Scale
the article states, "The marginal returns discussed refer to cases when only one of many inputs is increased (for example, the quantity of seed increases, but the amount of land remains constant). If all inputs are increased in proportion, the result is generally constant or increased output." This is not correct. The short run is defined as a situation in which at least one of the factors of production is fixed - it does not preclude situations in which multiple factors of production are fixed and there are multiple variable inputs. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 23:27, 15 September 2009 (UTC) Under these circumstances the law of diminishing marginal returns still applies. Diminishing marginal returns is also a necessary condition to constant and decreasing returns to scale. Unless the production function exhibits diminishing marginal returns to at least one of the factors of production the function will exhibit increasing returns to scale.--Jgard5000 (talk) 08:47, 18 September 2009 (UTC)jgard5000

Additionslly returns to scale sand economies of scale are different but related concepts. Returns to scale examines the effect on output of a porportionate change in inputs. Economies of scale examines the change in cost induced by a change in output. It is not necessary that the inputs chsnge proportionately.--Jgard5000 (talk) 16:13, 19 July 2010 (UTC)jgard5000--Jgard5000 (talk) 16:13, 19 July 2010 (UTC)

Lack of criticism
This is mentioned in other posts, but I feel it's necessary to repeat this in hopes someone with more credit can make the edit. Diminishing marginal returns is used in both consumer and production theory. However, the use in production theory requires inputs to be fixed in the short term--and there is no reason to believe this is true in reality. Early economics used diminishing marginal returns in relation to inputs like land, where good land would be used first and as demand increased poorer land would be utilized reducing the marginal product. In todays production, as said by someone else, we assume that all inputs are qualitatively identical therefore we require inputs to be fixed for diminishing marginal returns to hold. It's hard to say any inputs would be fixed in short run--and if they were it would require one's demand of an input is dependent on the supply available--breaking the rule that supply and demand are independent of each other.

This is a modern-day criticism of neoclassical economics that is often glazed over because it's implications are too strong given the importance of an downward-sloping marginal product in our current theory of production. See: Keen, Steve (Debunking Economics, pg 65) —Preceding unsigned comment added by 128.233.151.212 (talk) 01:37, 6 September 2010 (UTC)

Too technical
One needs to be an economist to understand this. And I'm only a doctor. —Preceding unsigned comment added by 188.2.215.93 (talk) 18:50, 8 April 2010 (UTC)


 * A little clearer now? —Ben Kovitz (talk) 19:48, 17 August 2011 (UTC)

Needs a graph
This article needs a graph showing the optimum production point and diminishing profits with increased resources applied. - 71.179.116.8 (talk) 18:06, 18 November 2012 (UTC)

Delete the incoherent sections, or improve them?
I tagged two sections in the current version: one on examples, the other arguing something about scale or viability of investments. The first section might be superfluous, now that the intro explains pretty much the same examples simply and clearly. The second section appears to be argumentative, perhaps original research, and makes the false claim that the law of diminishing returns has very few examples in practice. If there is some encyclopedia-worthy idea in either of these sections, though, I hope someone could rewrite to make the idea clear. Probably the false claim about the l.d.r. having few real-world examples is just a confusion with the fact that the l.d.r. explains why people normally vary more than one factor of production when enlarging an investment. The influence of the l.d.r. on investments and profitability sounds like a worthy topic. But if no one steps forward to at least start unscrambling these sections within the next couple of weeks, I will delete them. —Ben Kovitz (talk) 04:32, 18 August 2011 (UTC)


 * I attempted to improve the Diminishing marginal returns section and would like someone else to look at it to decide whether the tag can be removed. I shortened the list of calculation steps a little bit but frankly think the whole thing is redundant with the text of the first paragraph.  Peter Chastain   [habla, por favor]  15:20, 2 April 2014 (UTC)

Figure Details
I've put in a figure caption to Figure 1, for easy referral in text, as well as explaining what the graphs mean. The axes titles don't do a good job of it, but the graphs themselves are useful, so I've left them rather than replacing. It would be good to replace at a later date. — Preceding unsigned comment added by Greentharp (talk • contribs) 08:39, 1 November 2020 (UTC)

Also now edited the information in the caption to reflect the information in the graphs more closely with diminishing returns as a topic.

Note that I've deleted the explanation that was previously there, feeling it was too wordy. If that was unhelpful, feel free to change it back. — Preceding unsigned comment added by Greentharp (talk • contribs) 09:23, 1 November 2020 (UTC)

cleanup requested
I'm only three weeks into my first economics class, so I don't feel at all qualified to adjust this, but it seems that the two major sections in the body of the article are merely restatements of each other. Am I missing something as to why the second example exists, if for any reason beyond using both dollars AND euros (sacrificing clarity and understanding for a non-USA bias, hah!)? It's confusing to say the least. --nick, 10/6/05 ___________________________________________

 Plain English appreciated++ Is there a way to write some of this in simpler language? I'm not an Econ major and parts of this article may as well have been written in Greek. For example: "In economics, the term "marginal" is used to mean on the edge of productivity in a production system..." Chris 02/24/08 ___________________________________________

''' Can be written instead as "a change induced by increasing or decreasing volume by one unit" -Greentharp 20/10/20

Actually, I think you could just use the word, 'marginal' and refer to a page which explains it clearly. 'Marginal Concepts' is another page on wikipedia which does this — Preceding unsigned comment added by Greentharp (talk • contribs) 09:28, 1 November 2020 (UTC)

Mathematics
I've started a new section to go into detail on the math behind the topic — Preceding unsigned comment added by Greentharp (talk • contribs) 09:41, 1 November 2020 (UTC)

Completed an initial version of the Mathematics section, including links with Output Elasticity as a concept — Preceding unsigned comment added by Greentharp (talk • contribs) 10:48, 1 November 2020 (UTC)

Brooks's Law
Is it appropriate to add a See Also link to Brooks's law and to link from Brooks's Law to this entry on diminishing returns?

Not Consistent

Brook's Law isn't an expression of the law of diminishing returns. It says increasing inputs makes the situation worse. Further, it isn't about output. The software project referenced by Brook's law is the same output, whether the marginal person is supplied or not. It does, however, decrease the efficiency per person.

The key point is that the impact of the extra person is negative, whereas diminishing returns is just a 'smaller' positive. — Preceding unsigned comment added by Greentharp (talk • contribs) 11:07, 1 November 2020 (UTC)

Example
I've pulled the factory example out of the introduction, putting it into the example section.

Then reworded the example section, showing the common progression from increasing returns to constant returns to diminishing returns, with the aim of helping to visualise. This is also done with the aim of leading into the section on mathematics. — Preceding unsigned comment added by Greentharp (talk • contribs) 11:23, 1 November 2020 (UTC)

Problems with theory using the factory example
The theory assumes “All things equal” when changing one variable. I’d argue that this is impossible, and that’s why returns are diminished. In the factory example we held the floor space constant while changing the number of employees. This, however, also changes the number of employees per unit area of floor space. If you double the number of employees while keeping the floor space constant, then you will half the area of floor space for each employee. I’d argue that it is fundamentally impossible to change one variable while keeping all other variables constant and that if you change one variable, there will necessarily be a change in the counterpart of that variable. For further information, see the related theory, Heisenberg’s uncertainty principle. Walid.Miran (talk) 19:27, 6 March 2021 (UTC)

application of term outside of economics
The law of Diminishing Returns can arguably apply(in both psychosocial and economic senses) to technological progress over time and to increasing social complexity. -Agreed. I have added how it can be explained outside of economic theory. ValTee28 (talk) 04:36, 19 April 2021 (UTC) Zara