Law+of+diminishing+returns

  //One of my top rules for eating comes from economics. The law of diminishing marginal utility reminds me that each additional bite is generally less satisfying than the previous bite. This helps me slow down, savor the first bites, stop eating sooner. It also helps get plenty of variety in my diet, because this rule also makes a meal of small plates far more enticing: 3 bites of 5 plates versus 15 bites of 1 will maximize satisfaction and nutritional variety. - Laura Kelley.//   back to Economics =Diminishing Returns = The law of diminishing returns is one of the best-known principles outside the field of economics. It was first developed in 1767 by the French economist Turgot in relation to agricultural production, but it is most often associated with Thomas Malthus and David Ricardo. They believed human population would eventually outpace food production since land is an integral factor in that exists in limited supply. In order to increase production to feed the population, farmers would have to use less fertile land and/or increase production intensity on land currently under production. In both cases, there would be diminishing returns.

The law of diminishing returns which is related to the concept of marginal return or marginal benefit states that if one factor of production is increased while the others remain constant, the marginal benefits will decline and, after a certain point, overall production will also decline. While initially there may be an increase in production as more of the variable factor is used, eventually it will suffer diminishing returns as more and more of the variable factor is applied to the same level of fixed factors, increasing the costs in order to get the same output. Diminishing returns reflect the point in which the marginal benefit begins to decline for a given production process. For example, the table below sets the following conditions on a farm producing corn: It is with three workers that the farm production is most efficient because the marginal benefit is at its highest. Beyond this point, the farm begins to experience diminishing returns and, at the level of 6 workers, the farm actually begins to see decreasing returns as production levels decline, even though costs continue to increase. In this example, the number of workers changed, while the land used, seeds planted, water consumed, and all other inputs remained the same. If more than one input were to change, the production results would vary and the law of diminishing returns may not apply if all inputs could be increased. If this were to lead to increased production at lower average costs, economies of scale would be realized.
 * Number of Workers ||  Corn Produced  ||  Marginal Benefit  ||
 * 1 ||  10  ||  10  ||
 * 2 ||  25  ||  15  ||
 * 3 ||  45  ||  20  ||
 * 4 ||  60  ||  15  ||
 * 5 ||  70  ||  10  ||
 * 6 ||  60  ||  -10  ||

The concept of diminishing returns is as important for individuals and society as it is for businesses because it can have far-reaching effects on a wide variety of things, including the environment. This principle although first thought to apply only to agriculture is now widely accepted as an economic law that underlies all productive endeavors, including resource use and the cleanup of pollution. Garrett Hardin effectively applied the theory in his 1968 article on the ? tragedy of the commons in which he described the use of many common property resources, such as air, water, and forests, as being subject to diminishing returns. In this case, individuals acting in their own self-interest may overuse a resource because they do not take into consideration the impact it will have on a larger, societal scale. Economists can also expand the theory to include limitations on common resources. The services that fixed natural resources are able to provide for example, in acting as natural filtration systems begin to diminish as contaminants and pollutants in the environment increase. Externalities such as these can lead to the depletion of resources and/or create other environmental problems.

However, the point at which diminishing returns can be illustrated is often very difficult to pinpoint because it varies with improved production techniques and other factors. In agriculture, for example, the debate about adequate supply remains unclear due to the uneven distribution of population and agricultural production around the globe and continued improvements in agricultural technology over time.

The challenge whether it be local, regional, national, or global is how best to manage the problem of declining resource-to-people ratios that could lead to a reduced standard of living. Widely used 'solutions' for internalizing potential externalities include taxes, subsidies, and quotas. Often, there are attempts to find bigger picture solutions that focus on what many see as the primary causes, namely population growth and resource scarcity. Reducing population growth, along with increased technological innovation, may slow the growth in resource use and possibly offset the impact of diminishing returns. These potential benefits are a key reason why population growth and technological innovation are most often used in analyzing sustainable development possibilities. []