In Chapter 1 of Scarcity and Growth Revisited, Simpson, Toman, and Ayres write that
The principal of diminishing returns explains a tremendous amount in economics. The more there is of something, the less productive is still more of it. ... It is the principle of diminishing returns that underlies the use of marginal analysis in economics, and it is marginal analysis that resolves the greatest puzzle in economics: the paradox of value. Why are some things, like water, both so useful and so cheap relative to things like diamonds, which are neither? Because of diminishing returns. There is so much water relative to diamonds that a little more water is of little incremental, or marginal, value. (p.4)
Surely this is mistaken. The paradox of value is solved by marginal utility, not diminishing marginal productivity (the law of returns). The authors equivocate between "diminishing returns" meaning "diminishing marginal utility" and "diminishing marginal productivity."
Why can't environmentalists understand economics? And just when I thought this was going to be a good book...
AnalyticalAnarchism.net - The Positive Political Economy of Anarchism
Yeah, they definitely missed the distinction.
Amazing how enviromentalists and policy makers will bastardize basic principles of economics so confidently.
Sage:Surely this is mistaken.
Surely, their conclusion is an epic FAIL.
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David Z
"The issue is always the same, the government or the market. There is no third solution."