GOODSOUND!GoodSound! "Editorial" Archives

November 1, 2004

 

The Law of Diminishing Returns

When I need a break from writing and evaluating equipment, I often turn to the online audio forums to read what other audiophiles are talking about. Whichever site I visit, I find that there are a few posters who always offer kind advice and encouragement to others -- but there is also a great deal of unthinking and malicious posting. Much of this comes from failures to use search functions. (Do you really think you’re the first person to want advice on what’s the best sub-$1000 CD player?) Some of it comes from failures of understanding. For example, the idea that the audio press and review publications review only expensive gear is often suggested, but it is demonstrably false (notice, for example, this very site). What I discuss here is something that even those good posters often invoke: the law of diminishing returns. I’ll argue that this law does not apply to the evaluation of audio equipment.

While the law of diminishing returns was formulated by Thomas Robert Malthus in his 1798 work, Essay on the Principles of Population, it first came to prominence in economic discussions about agriculture in the 19th century. Suppose you are a farmer with a farm of 10 acres and you are trying to decide how many farmhands to hire. The law says that there is some number of farmhands (let’s say that number is 10) that will maximize your returns in relation to your capital outlay. If you hire more than that number of farmhands, then the relation between your outlay of capital and your return will begin to diminish. If we assume that each worker can do the same amount of work in a day (say, each can take care of an acre of farmland), then, once you have more workers than you need, you’ll be paying too much in labor for your eventual returns. Consider these ratios of the work that needs to be done to the labor you hire to do it:

10 acres ÷ 10 workers = 1
10 acres ÷ 11 workers = 0.9
10 acres ÷ 12 workers = 0.83; etc.

Clearly, hiring more workers is not always the most economically rational thing to do: the more workers you hire, the more your return relative to cost diminishes.

We can see the appeal to the law of diminishing returns in the purchase of audio equipment if we look at the example of CD players. According to those who appeal to the law, there is some price point -- say, $100 -- after which your return relative to cost begins to diminish. Spending more than $100 on a CD player would then be irrational, because your return relative to cost would be less than it could have been had you bought a $100 player. The claim made isn’t that there aren’t better CD players, but that the economic outlay to acquire them is great given what you get in return. It’s like hiring 12 farmhands: all 12 will work for you, but you’re spending more than you need to in order to get the job done.

One major difference between the agricultural and audio examples is what we’re interested in measuring. In the farm example, it’s clear that we have 10 acres to farm; but in the audio case, what takes the place of the land? For the law of diminishing returns to apply, all factors but one need to remain constant; to use the law, we must have some objective measurement we can refer to. I hope that you buy audio equipment because you are trying to experience some amount of pleasure from listening to music. However, it is impossible to determine an objective measurement of the pleasure derived from listening to music that is applicable to the whole population. If that is so, then there is a serious problem in applying the law of diminishing returns to the purchasing of audio equipment.

I might agree that the cost of a piece of equipment is enormous, but I still might think it a worthy addition to my system. I might, in other words, fully agree that a purchase is, from a purely economic point of view, irrational, but still think it a worthwhile purchase because of the amount my enjoyment will be increased.

I had this experience just recently when a subwoofer arrived for review. I didn’t think that the sub would add much to my listening experience with my Quad speakers, and that I would likely rely on some bookshelf speakers during the review. I had a pleasant surprise when I put it into my listening room with the Quads. The sound was fuller, the whole presentation slightly more holographic. Adding a subwoofer is an expense that I thought would add very few things to my system, but my enjoyment has been undeniably increased, and promises to remain at that heightened level.

You’ll have to wait some time before you see my review of the subwoofer, but this month we offer another subwoofer for you to consider: the Rocket UFW-10. You, too, may find that slight improvements lead to greater enjoyment. As we often report in GoodSound!, such additions don’t have to be economically irrational at all.

…Eric D. Hetherington


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