The law of diminishing returns states that in productive processes, increasing one factor of production while keeping all the others constant will at some point yield lower per-unit returns. In laymen’s terms, more of something is not always better. At some point of augmentation the process will actually flip over into the law of negative returns, which is when more actually equals less.
An example of this would be ethanol production, which requires more energy (and money) to produce than the final product actually yields. That’s why ethanol production requires a government mandate and subsidies to remain “viable“.
Every system has a point of optimal operation. This is not to suggest perfection, because we live in an imperfect or, as we Christians understand it, fallen world. There is never any such thing as 100% efficiency, whether in energy usage, electronic data management or baseball.
For millennia, crop yields were the standard by which efficiency was determined. Crops planted too densely compete for soil nutrients, sunlight and water, and the harsher the competition the lower the final yield. Similarly, the internal combustion engine has certain physics parameters within which it yields its maximum return of horsepower per unit of fuel consumed, with minimum exhaust and ancillary loss of energy (heat). If you push too far to reduce one of these factors, you rapidly depart from that maximum efficiency.
Optimum yield has been the foundational tenet of economics since time began, and the free marketplace has always been the one to recognize and reward those who attain it.
In the public sector, the fallacious belief of big-government types is that more is always better, particularly where regulation is concerned. The EPA has imposed standards on everything from smokestack and automobile emissions to groundwater purity. Historically, many of these regulations were beneficial by restoring a cleaner, healthier environment and forcing development of better ways to manufacture products and dispose of waste.
But they didn’t stop at good or even great, and instead are pushing for perfect. This means the returns gained for such restrictive standards are not likely to be either feasible or attainable. To date, I have never met a bureaucrat who believed in such limits, and most likely neither have you.
To illustrate this matter of diminishing returns, a Democratic congress pushed through new auto emissions limits that in essence make it mandatory that American car manufacturers produce a certain percentage of electric cars (non emitters) each year, in order to offset those whose emissions put the company over the gross limit. This requirement ignores the source of electricity required to refuel these cars, namely coal-burning power plants.
So by forcing a de facto increase in electric cars in the name of cleaner air, the bureaucrats have increased the need for greater production of electricity to meet this new demand through plants that burn fossil fuel! President Obama’s articulated attitude towards coal as an energy source is that it will never be “clean” enough to meet his personal standard of acceptability, and therefore must be abolished.
So we have a standard (law) that not only mandates the production of electric cars, but is set against a backdrop of decreasing electricity generation by coal. What power source is going to replace those coal generators? How much is that technology going to cost, both now and later on, and will it be enough to meet the need? Nobody knows, but the air cleanliness regulation doesn’t take into account any real job-costing to produce its end result. The likelihood is that it will be yet another area where only government can afford to keep it operational. The problem is, our government is not only broke today, but it is broke twenty years from now already.
You can force auto makers to produce electric cars, but whom do you force to purchase them if the public doesn’t? Why, government agencies, of course! The federal government is the overwhelming purchaser of the Chevy Volts purring quietly off the assembly line, because the public doesn’t want them. Coincidence or consequence?
We are over-regulated, through the pursuit of some arbitrary standard of perfection. Our economy is stifled by regulation. Our social and educational arenas, long the marketplace of ideas, are instead stagnating from fear that having an opinion may violate some government standard of intolerance. Our various regulatory administrations continue to grow unchecked as they subvert the Constitution through bureaucratic power creep.
Yet, I look around at the America I live in, and a lot more is going right than wrong in this country and has been for my entire 50 years. I watched in amazement as Reaganomics expanded the nation’s economy so that more people had better incomes than ever before in our history. The irony was that with so much economic growth resulting from fewer restrictions, the government itself was able to take in more revenue. So why is the greatest, freest nation on Earth so determined to shackle its own citizenry and potential today? What do we get in return for this?
Libertarians are right about their main tenet – small government that is restricted only to its incepted responsibilities is best. The more we regulate every little detail of American life, the less we get back in exchange. In many instances, we are running negative returns. We’re so legislated that the only thing left is special interest groups fighting over the table scraps. I want candidates who will take a pledge to roll back and reduce legislation, not make more of it.
People need to accept that perfection is not attainable, nor is the pursuit of it worth the high price. The estimated cost of increasing smokestack emissions from the prior 92% clean to the new 95% standard is double what it took to get them from 70% to 92%. Would anyone know the difference 3% makes? Yet the cost for compliance will put many of those companies out of business, and their employees out of work. That IS a real, tangible consequence.
Image: courtesy of Riffsyphon1024 (Steven Greenwood); public domain