The Law of Diminishing Returns

When a company increases its work force, the amount of total output will theoretically increase exponentially; that is until the workforce is too large.  After there are too many workers, the total output will start to decrease.  This is the concept of an economic law called the Law of Diminishing Returns.

To show an example of this, a game was played known as the tennis ball game.  In this game, it starts out with one person picking 1 tennis ball out of  a bag, running 5 meters, and placing the ball in the bucket at the end of the 5 meters.   At the end of 30 seconds, we count how many balls are in the bucket.  The next round, we clear the bucket and start over, only we add one person to help.  The 3rd round has 3 people helping, 4th round 4 people, and so on…

The first round 8 balls were placed in the bucket.  According to the law, we would assume more than 16 balls would be placed in the bucket the next round.  Unfortunately, there were only 11. So, the total output did increase, but not at as high of a rate as was hoped.  Though it only increased by 4 or 5 each time, the maximum was reached at the 7th or 8th round, with 25 balls.  Then, it started to decrease.  When there were 13 people helping, only 15 balls were placed in the bucket.  Too many workers=less total output.

Throughout the game innovations did help.  So, the total output is not only dependent on the number of workers, but the size of the labor force does have a great effect on the total output.