Wednesday, August 13, 2008

The Law of Diminishing Returns

There is a principle in economics called the law of diminishing returns. Basically, events have an apex point where more of a good thing is no longer beneficial.

The law of diminishing returns holds for almost every aspect of life.

For example, little or no food is bad for your health and too much food is also bad for your health. Too little rain can cause a disaster and too much rain can also cause a disaster.

The point of diminishing returns always peaks somewhere between too little and too much.

Having a couple of pets can be a joy for some people. If you have 40 or 50 of them, you have slipped past the point of diminishing returns. You also have an odor problem.

A significant other, such as a girlfriend or boyfriend or life partner, may bring added fulfillment to your life. But if you have more than one significant other, you’re added fulfillment will likely be transformed into added anguish. Thus, the point of diminishing returns for the accumulation of significant others usually peaks at one.

In my case, it usually peaks at zero. Hooking up with the wrong woman is a lot like taunting a wolverine – at some point, things will turn ugly.

There's even a point of diminishing returns when it comes to wealth. It would be nice to have enough money to do everything you desire. But if you become rich beyond the capacity to deal with it, you’ll soon learn not to trust anyone and be forced to hire accountants to keep an eye on your accountants.

The law of diminishing returns works on large scale matters as well.

Costa Rica is the only Central American country that has never had a military. It’s also the only Central American country that has never been invaded by its neighbors or taken over by its military leaders.

A well-regulated militia, as suggested in the US Constitution, should be adequate to protect us from our neighboring countries. Having enough nuclear weapons to kill everyone on the planet several hundred times seems to be beyond the point of diminishing returns. Personally, I don’t feel safer simply because we have missiles pointing at those who have missiles pointing at us.

The lack of a common agreement within a group of people (in the form of government) leads to chaos. You can't have an orderly, secure society without a basic set of reasonable rules. But the formation of government requires constant scrutiny. Those who seek power over others inevitably attempt to control governments, often leading to corruption or brutal totalitarian rule.

On the other hand, too much government is often more destructive than the lack of government. A collectivist society (such as socialism or communism) enslaves everyone into a rigid system of bureaucratic inefficiency.

There must be a reasonable middle ground, where people can be as free as possible without infringing upon the freedom of others.

Agreeing on the point of diminishing returns at a national level is always a tug-of-war between those who desire to be independent and those who feel compelled to impose their will on others. Unfortunately, the more we strive to become a cohesive society, the less individual freedom we are allowed to enjoy.

The national debt of the USA is nearly $9 trillion and worsening daily, yet lawmakers in Washington continue to spend our tax dollars like a bunch of drunken sailors on shore leave. Our country has far exceeded the point of diminishing returns and future generations will be saddled with the mess we have created.

Clearly, moderation is the key to happiness.

This is good news for me. I live such a modest existence I must be one happy hombre.


Quote for the Day – "A nation of sheep will beget a government of wolves" Edward R. Morrow

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