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 youre the first person to want advice on
whats 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. Ill 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 (lets 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, youll 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 isnt that there arent better
CD players, but that the economic outlay to acquire them is great given what you get in
return. Its like hiring 12 farmhands: all 12 will work for you, but youre
spending more than you need to in order to get the job done.
One major difference between the agricultural and audio
examples is what were interested in measuring. In the farm example, its 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 didnt 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.
Youll 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 dont have to be economically
irrational at all.
Eric D. Hetherington
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