The law of diminishing marginal returns rules your life
Even too much of Uncommon Wisdom can be a bad thing
Few people know about a law that governs their lives. It affects everything they do, everything they enjoy. It is a law discovered by economists known as the law of diminishing marginal returns (or diminishing marginal utility). The rough idea is that too much, of even a good thing, can be bad, everything else being equal. The law basically says that: ceteris paribus (means ‘all else being equal’), the first unit of something is worth more than the next, which is worth more than the next, and so forth. Each extra unit is worth less than the one prior. The law is meant to capture how we think about and weigh the practical value of stuff.
Prior to encountering the law of diminishing marginal returns, one might naively think that something is either valuable or it isn’t—that distinction seems pretty straightforward. And the distinction is correct, but incomplete. The other aspect of the law of diminishing marginal returns is that, in practical terms, what one has will affect how much they value the stuff they acquire.
Sounds too abstract? Fair enough. Consider an example: Agent Scully is an FBI agent who values her side arm to deal with trouble. She would even value a backup gun, just in case she loses her primary weapon—a common tactic used by law enforcement. Perhaps she would value a third gun, to keep at home for protection when she isn’t officially packing. Perhaps she would value a forth gun as a personal backup. But even as a law enforcement officer, Scully only values guns to a point. By the time we get to gun six through ten, guns would have little to no value. Add even more guns, and they suddenly acquire disvalue: they would get in the way, pose a safety issue, and cause many other problems. And if you don’t like the gun example, you could swap them out for sweaters, cars, get well soon cards, or trips to Disneyland, and the law of diminishing marginal returns would still apply.
Part of why the law of diminishing marginal returns governs our lives has to do with their finite duration. Because we only have so much time to do the things we care about, each additional unit of something, past the point of satisfying a need or desire, is just stuff we have to spend time addressing (e.g., Scully getting rid of the guns she doesn’t need), and that is time we cannot spend on other stuff we care about. Often when we are addressing one need or desire, we cannot satisfy others. And the others matter too. While Agent Scully cares about her safety, on and off the job, she also cares about other stuff too like friendship, sleep, and so forth. Paradoxically, having too much of a good thing can be bad.