12

Is there a term for the point at which returns begin to be diminishing returns?

The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant ("ceteris paribus"), will at some point yield lower incremental per-unit returns"

Not necessarily in economic / production theory, except metaphorically. I was thinking about using it in a sentence about further study, or existential dread.

  • 1
    Peak? Can you give us an example? What context will it be used in if not economic/production theory? – Hank Feb 3 '17 at 20:36
  • 11
    I think you are looking for "inflection point". – user66974 Feb 3 '17 at 20:40
  • 4
    @Hank - the concept of an inflexion point can be used both in math and figuratively in any way it may be useful to convey the idea of the change in a trend. – user66974 Feb 3 '17 at 20:43
  • 1
    @Josh I don't see any reason why it can't be used in that manner, I just don't currently possess the ability to look and see if it has been used in this way before. – Hank Feb 3 '17 at 20:44
  • 1
    reverse tipping point? – concerned Feb 3 '17 at 20:45
31

Point of diminishing returns has been used to describe the point at which the law of diminishing returns kicks in.

Examples from literature:

A very general limitation on the scale of production is found in the economic law of diminishing or non-proportional returns. This law, first applied to land, states that if more and more men are set to work on a piece of land, the time comes sooner or later when the output of the last man added becomes less than the output of the man added before him. This may be called the "point of diminishing returns."

The Brevity Book on Economics, by Harrison McJohnston -- Brevity Publishers, 1919

More recently,

Insulation is a prime example of the "point of diminishing returns" in economics. In essence, the first layer of insulation you put on a home will hold in the most heat and save the most money, while each successive layer will provide less and less of a return for the same amount of investment.

Living Homes: Integrated Design & Construction, by Thomas J. Elpel -- HOPS Press, 2005

  • 1
    I feel like the OP could've found this answer from a basic google search. Not contesting it's validity, just the original research that was done before asking the question. – Hank Feb 3 '17 at 20:57
  • 7
    @Hank do not understimate our lack of ingenuity – concerned Feb 3 '17 at 20:58
  • 1
    also termed "the point of maximum Marginal Product" – concerned Feb 3 '17 at 21:02
  • 3
    Links go bad easily, can you offer brief citations of the two articles you referenced? – JoeTaxpayer Feb 4 '17 at 12:21
  • 1
    @Hank It's enough of a Jeopardy-style "stupid answer" that searching for it would likely not have made it clear that the phrase in the question is in fact the idiomatic expression sought. – chrylis -on strike- Feb 5 '17 at 20:07
24

In mathematics, a point where the concavity of a curve changes from concave upward to concave downward is called an inflection point. In more mathematical terms, it is also a point where the second derivative of the curve changes from positive to negative or vice versa, as the example linked in wolfram-alpha shows.

When the marginal returns are increasing, the profit curve is concave up (has a positive second derivative) and when marginal returns are diminishing, the profit curve is concave down (has a negative second derivative). Thus the transition meets the definition of an inflection point.

  • 3
    @user3293056: As an example, "Ladies and gentlemen, I believe we have reached the inflection point in our efforts to curb social injustice..." Works for me. But I am a little weird and a former math major. – cobaltduck Feb 3 '17 at 20:49
  • 1
    @user3293056 - you still have a series of values that if you represent graphically with a curve it will show an inflexion point. – user66974 Feb 3 '17 at 20:49
  • 2
    @Josh i believe we have reached the inflexion point of this discussion – concerned Feb 3 '17 at 20:50
  • 1
    @cobaltduck I believe you meant to say, "recovering" math major, right? – BlackVegetable Feb 4 '17 at 3:48
  • 1
    @BlackVegetable - Currently gainfully and happily employed in software engineering. 'Nuff said. – cobaltduck Feb 4 '17 at 13:20
7

If you conceive of returns as occurring along a bell curve rising to a single maximum point and then falling from there, the high point in the curve is the point of diminishing returns—that is, the point at which the returns stop growing and (immediately thereafter) begin to shrink.

This is the supposed insight at the core of the famous "Laffer curve," where the curve in question purports to track tax revenue based on different tax rates and their effects on taxpayers' inclination to earn taxable income. In the Wikipedia article about the Laffer curve, the point at which returns cease to increase and begin to diminish is called the "maximum revenue point."

I suspect, however, that most people who hear or use the phrase "point of diminishing returns" do not immediately visualize it as the apex of a roughly parabolic curve; instead, they probably think of a point at which the value of the returns has become disappointingly small. Such a point is likely to be fairly far down the flank of the curve from the apex, and might be thought of in practical terms as the "point of abandonment." After all, the hardest part of halting any endeavor at the true "point of diminishing returns" is recognizing that point for what it is: unlike, say, a mountain peak, an economic apex isn't easy to identify until you've gone a considerable way down the other side.

7

There is also

tipping point

meaning roughly the same as "point of no return".

  • 2
    I'd argue that this really isn't the same thing as a point where diminishing returns begin; a tipping point is much more severe. Adding additional resources while the returns diminish may be inefficient; increasing effort beyond a tipping point is more likely to be actively detrimental. – Periata Breatta Feb 5 '17 at 1:12
5

Depending on the context, the point where you start to get diminishing returns might be called the "sweet spot". From the American Heritage® Dictionary of the English Language, Fifth Edition:

sweet spot n.

  1. The place on a bat, club, racket, or paddle, where it is most effective to hit a ball.
  2. An area or range that is most effective or beneficial: an engine's sweet spot of rpm's for maximum fuel-efficiency; a store's demographic sweet spot of women in their twenties.
3

The phrase "it's all downhill from here" springs to mind.

While not conveying the exact meaning you wish to express, it's probably more idiomatic and more likely to be understood right off the bat. The other answers are closer to the meaning you want to confer, but I feel at least some of them would either require some explanation or are less likely to be known and understood.

2
  • inflection point
  • knee point
  • tipping point (marginal)
1

I would say the word peak could be used in certain contexts.

adjective: peak

  • at the highest level; maximum. "the canal was restored to peak condition"

  • characterized by maximum activity or demand. "traffic speeds are reduced at peak hours"

synonyms: maximum, maximal, top, greatest, highest, utmost, uttermost, extreme; https://www.google.com.au/webhp#q=define:+peak

For example "Peak oil":

Peak oil, an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. https://en.wikipedia.org/wiki/Peak_oil

0

Depending on the context, saturation may be a good word. For example, some say "the market is saturated with companies that do X". What is means of course, is that there are diminishing returns to doing more of X in the economy.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.