Economics · Level 5 · 240 words

Diminishing Returns

Original passage © Studio AM, written for Fluency.

Add fertilizer to a field and the harvest grows. Add more, and it grows again, though by a little less. Keep adding, and each new sack of fertilizer lifts the yield by a smaller amount than the one before, until eventually another sack does nothing at all - and past some point, poisons the soil and the harvest falls. This pattern is so common that economists gave it a law: diminishing returns.

The principle is that when you keep adding more of one input while holding the others fixed, the extra output from each additional unit tends to shrink. It appears almost everywhere. The first hour of study teaches more than the tenth. The first employee in a small kitchen adds a great deal; the tenth, in the same cramped space, may only get in the way. More is not simply better; more has a shape, and that shape usually bends downward.

Missing this leads to a familiar mistake: assuming that if some of a good thing helps, more of it must help proportionally. We overwork, overstaff, overstudy, and over-apply, pouring resources into an input long after it has stopped paying us back.

The useful question is never simply whether an input helps, but whether the next unit of it helps enough to justify its cost. Recognizing where the curve flattens is what separates effort that compounds from effort that merely exhausts. The wisdom is knowing when to stop adding.

Comprehension questions

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4 questions
1. What is the main idea of the passage?

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A. Adding more of one input while others stay fixed gives smaller and smaller gains, so more is not always better.
Diminishing returns means 'the extra output from each additional unit tends to shrink,' so more is not simply better.

2. According to the passage, what eventually happens if you keep adding fertilizer past a point?

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B. It poisons the soil and the harvest falls
Past some point another sack 'poisons the soil and the harvest falls.'

3. The examples of study hours and kitchen workers are meant to show that:

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A. The same shrinking-gains pattern appears far beyond farming.
They follow the claim that the pattern 'appears almost everywhere,' extending it beyond the field.

4. In 'more of one input,' the word "input" most nearly means:

Show answer for question 4

A. a resource put in to produce output
Fertilizer, hours, and workers are all inputs - resources fed in to get output.

Source: Written for Fluency. Original passage © Studio AM, written for Fluency.