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On the law of diminishing returns

Reading a book on simple living and thinking the following - what if diminishing returns just occur at a much smaller scale than economic textbooks tell us? What if working in teams of 1-6 people is the most optimal mode of production, (although huge corporations with marketing and PR departments are obviously capable of selling us more products). What would be the implications?

When I say “most optimal” I mean that it brings the most value to people. Unfortunately this cannot be measured and put in concrete terms as “value” is too abstract concept to be used as a metric. Profit, on the other hand is simple to measure, however, it is the wrong metric.

When you measure the value of a given transaction by profit, you only measure the effect it has on the people who actually acquire that profit. You don’t measure the effect on neither the workers (who aren’t shareholders), nor the consumers.

So, for example a corporation that manufactures a very low-quality product with slave-like labor would do very well, if you are only looking at the spreadsheets - low expenses, high worker productivity, massive profit etc. But if we try to measure the (negative) value that this company brings to the people who work for it - their health and financial situation or the negative value that it brings to the consumers, who get something manufactured by someone who doesn’t look after their interests.

If we take these groups into account, then a small business venture that is owned by the people who work in it brings much more value than a big corporation. Bonus points if they produce stuff for themselves. In this case instead of having three groups (shareholders, workers, consumers) and an organization that serves just one of these groups (not to mention it is often the smallest one), you have just one group that looks after it’s own interests, e.g. even if twitter makes more profit than mastodon (although twitter is losing and Mastodon has no profit cause it is not a corporation), I argue that the value that masto brings to its users (consisting of information free of ads and hates peech) as well as the value it brings to the people involved in its development is far greater than the value twitter brings to its users and employees.

Written on June 11, 2023

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