MPL 10 is the marginal product of labor curve given 10 acres to cultivate (the same curve as
in Figure 54.2), and MPL 20 is the marginal product of labor curve given 20 acres. Both
curves slope downward because, in each case, the amount of land is fixed, albeit at different
levels. But MPL 20 lies everywhere above MPL 10 , reflecting the fact that the marginal prod-
uct of the same worker is higher when he or she has more of the fixed input to work with.
Figure 54.3 demonstrates a general result: the position of the total product curve
depends on the quantities of other inputs. If you change the quantities of the other in-
puts, both the total product curve and the marginal product curve of the remaining
input will shift. The importance of the “other things equal” assumption in discussing
diminishing returns is illustrated in the FYI above.546 section 10 Behind the Supply Curve: Profit, Production, and Costs
Was Malthus Right?
In 1798, Thomas Malthus, an English pastor, au-
thored the book An Essay on the Principle of
Population,which introduced the principle of di-
minishing returns to an input. Malthus’s writings
were influential in his own time and continue to
provoke heated argument to this day.
Malthus argued that as a country’s popula-
tion grew but its land area remained fixed, it
would become increasingly difficult to grow
enough food. Though more intensive cultivation
of the land could increase yields, as the mar-
ginal product of labor declined, each successive
farmer would add less to the total than the last.
From this argument, Malthus drew a power-
ful conclusion—that misery was the normal
condition of humankind. In a country with a
small population and abundant land (a descrip-
tion of the United States at the time), he argued,
families would be large and the population
would grow rapidly. Ultimately, the pressure of
population on the land would reduce the condi-tion of most people to a level at which starva-
tion and disease held the population in check.
(Arguments like this led the historian Thomas
Carlyle to dub economics the “dismal science.”)
Happily, over the long term, Malthus’s pre-
dictions have turned out to be wrong. World
population has increased from about 1 billion
when Malthus wrote to more than 6.8 billion in
2010, but in most of the world people eat bet-
ter now than ever before. So was Malthus com-
pletely wrong? And do his incorrect predictions
refute the idea of diminishing returns? No, on
both counts.
First, the Malthusian story is a pretty accu-
rate description of 57 of the last 59 centuries:
peasants in eighteenth-century France probably
did not live much better than Egyptian peasants
in the age of the pyramids. Yet diminishing re-
turns does not mean that using more labor to
grow food on a given amount of land will lead to
a decline in the marginal product of labor—ifthere is also a radical improvement in farming
technology. Fortunately, since the eighteenth
century, technological progress has been so
rapid that it has alleviated much of the limits
imposed by diminishing returns. Diminishing re-
turns implies that the marginal product declines
whenallother things—including technology—
remain the same. So the happy fact that
Malthus’s predictions were wrong does not in-
validate the concept of diminishing returns.
Typically, however, technological progress re-
laxes the limits imposed by diminishing returns
only over the very long term. This was demon-
strated in 2008 when bad weather, an ethanol-
driven increase in the demand for corn, and a
brisk rise in world income led to soaring world
grain prices. As farmers scrambled to plant
more acreage, they ran up against limits in the
availability of inputs like land and fertilizer.
Hopefully, we can prove Malthus wrong again
before long.fyi
Module 54 AP Review
Check Your Understanding
- Bernie’s ice-making company produces ice cubes using a 10-ton
machine and electricity (along with water, which we will ignore
as an input for simplicity). The quantity of output, measured in
pounds of ice, is given in the accompanying table.
a. What is the fixed input? What is the variable input?
b. Construct a table showing the marginal product of the
variable input. Does it show diminishing returns?
c. Suppose a 50% increase in the size of the fixed input increases
output by 100% for any given amount of the variable input.
What is the fixed input now? Construct a table showing the
quantity of output and the marginal product in this case.Solutions appear at the back of the book.