Some people find economics boring and stale. That’s too bad. Whether we like it or not, we are impacted by economic decisions every day. Every time we buy something, use something, or create something, we are involved in the process of economics.
The Law of Diminishing Returns
The law of diminishing returns is an excellent example of an economic concept that we are all familiar with, even if we never knew what it was called.
Here’s an example. You’re designing an outfit that’s meant to be fun and whimsical. You add a couple of ostrich feathers to see how it looks. It’s cute. You add a couple more. Now that’s interesting. You add even more feathers. Ouch! Now it looks like some crazy outfit for a kid’s Halloween party. More is not necessarily better. You just experienced the law of diminishing returns.
This is an issue that can be found anywhere in the textile industry. A small clothing manufacturer opens up shop and operates an ethical and responsible business. Everyone is paid well and treated properly.
The owners are enjoying their success, and the workers feel like they are producing high-quality, ethical fashion wear.
Business is so good that the need for the factory’s products is growing. The owners expand their operation to accommodate the demand. They bring in additional equipment and hire more workers.
Well, you know how the story goes. The facility grows and grows. More people are hired, more product goes out through the loading docks. But at some point, the fun and excitement about working in such a successful organization begins to fade. Even though the owners have added more workers, the output actually begins to slow.
The owners try at first to give pep talks to motivate the workers. Eventually though, the pep talks turn into threats of job cuts and reduced hours and benefits. Now the business is in a slump, and things don’t look so good. Quality drops, moral is at an all-time low, and the demand dwindles.
What happened?
What was once a responsible and ethical clothing shop is now a dismal and unhappy workplace. The employees who had relied on the company for their livelihood are suddenly desperate and looking for new work. Those who are unable to secure better employment find themselves trapped in a dead-end job.
The owners aren’t happy either. They started in the textile industry to create ethical fashion products. Their focus was quality. But when that focus shifted to quantity, everything changed.
The law of diminishing returns quickly turned a productive business into a nightmare of broken dreams for everyone. In the end, they all learned that more is certainly not always better.