By Tanner Eastmond
The law of diminishing marginal returns is an important principle in economics. This principle, which states that each additional unit of production added contributes a decreasing amount of output, is found in virtually all aspects of everyday life. For example, after a student has studied for many consecutive hours, each additional hour of study is less productive than the last, a phenomenon that nearly every student experiences on a weekly basis. Another example can be found with fast food restaurants. If they have only one employee, adding another employee will increase their productivity significantly. However, if the employees are standing shoulder to shoulder at the grill, elbowing their neighbor in order to flip their allotted burgers, adding one more employee will not increase the collective productivity by nearly as much as the first or second employee. We do not have to look far to see this principle in action, but is it always the case that as inputs are increased, they become increasingly less productive?
Robert Frank (1997), an economist at Cornell University, brings to light one situation where increased ‘inputs’ do not necessarily lead to more productive ‘outputs’. He discusses what is called the hedonic treadmill. The hedonic treadmill model suggests that good or bad events affect happiness temporarily, but people quickly shift back to neutrality (Deiner, Lucas, and Scollon, 2006). Frank gives the example of how a new, larger house is exciting and makes a person happy for a while, but they quickly become accustomed to the increased size and quality. However, he gives the examples of traffic, exercise, and time with friends and family as things that always increase or decrease our happiness. The implication is that our time with friends and family continues to make us happier, and not at a decreasing rate. Furthermore, as we continue to build those relationships, we can enjoy those experiences even more than we have in the past.
Another important example of increasing returns to scale in our lives is service to those around us. Henry B. Eyring spoke at BYU in 1982 and addressed this very concept. In his speech, entitled “A Law of Increasing Returns”, he suggests service to others is one area that does not follow the well-documented law of diminishing returns. He says, speaking of service and rewards that take time to develop, “Instead of first effort yielding returns, with a steady decline, it’s the reverse. First efforts, and even second efforts, seem to yield little. And then the rewards begin, perhaps much later, to grow and grow” (Eyring , 1982). He then tells the story of his father, who was constantly serving and helping those around him. After he discusses what his father had done for others, he says “[m]others invest so much more in children that a kiss from a little girl still leaves a lot for the future. Men and women working outside the home deal mostly with early crops and with the law of diminishing returns. In the home, they spend far more on late crops and the law of increasing returns” (Eyring, 1982). According to him, serving our family members is a clear example of our efforts meaning more and more as time goes on.
Another example to corroborate the idea that helping others contributes to long term happiness is presented in Dunn, Aknin, and Norton (2008). They find that individuals who spend more money on others experience more happiness. They even randomly assign individuals to spend money on themselves or on others and find similar results.
These findings all suggest a perhaps counter intuitive result; people who focus on others increase their happiness. Additionally, individuals become happier as they help and spend time with others. We live in a time where many people are spending a lot of time, money, and effort to increase their own happiness. Unfortunately, these expenditures are often spent for increasingly smaller returns. Perhaps individuals’ time, money, and talents are better allocated on others as they seek to increase their returns to happiness.
Diener, E., Lucas, R. E., & Scollon, C. N. (2006). Beyond the hedonic treadmill: revising the adaptation theory of well-being. American psychologist, 61(4), 305.
Dunn, E. W., Aknin, L. B., & Norton, M. I. (2008). Spending money on others promotes happiness. Science, 319(5870), 1687-1688.
Eyring, H. B. (1982). A law of increasing returns. https://speeches.byu.edu/talks/henry-b-eyring_law-increasing-returns%E2%80%A9/.
Frank, R. H. (1997). The frame of reference as a public good. The Economic Journal, 107(445), 1832-1847.