Law of diminishing returns

[ComradeRed]

Originally posted by [email protected] 14, 2007 09:32 pm
The USA has oil but the rate of extraction of oil peaked in the USA in the 70's, due to the law of diminishings returns the USA can't extract oil at a significantly higher rate.
Law of diminishing returns, that's gold. :lol:

Why not start using praxeology and quoting Mises while we're at it?

[R_P_A_S]

Originally posted by ComradeRed+March 15, 2007 05:34 am--> (ComradeRed @ March 15, 2007 05:34 am)
[email protected] 14, 2007 09:32 pm
The USA has oil but the rate of extraction of oil peaked in the USA in the 70's, due to the law of diminishings returns the USA can't extract oil at a significantly higher rate.
Law of diminishing returns, that's gold. :lol:

Why not start using praxeology and quoting Mises while we're at it? [/b]
oh come on comradeRed.. i thought you were going to shed some new light for me on this issue! :mellow:

[Psy]

Originally posted by ComradeRed+March 15, 2007 05:34 am--> (ComradeRed @ March 15, 2007 05:34 am)
[email protected] 14, 2007 09:32 pm
The USA has oil but the rate of extraction of oil peaked in the USA in the 70's, due to the law of diminishings returns the USA can't extract oil at a significantly higher rate.
Law of diminishing returns, that's gold. :lol:

Why not start using praxeology and quoting Mises while we're at it?[/b]
Because the law of diminishing returns explains it.

According to this relationship, in a production system with fixed and variable inputs, beyond some point each additional unit of variable input yields less and less additional output.

That means it becomes more expensive for a smaller increase, eventually you'll hit a 1:1 ratio where you spend all the extra production to get that extra production.

[ComradeRed]

Originally posted by Psy+March 14, 2007 09:47 pm--> (Psy @ March 14, 2007 09:47 pm)
Originally posted by [email protected] 15, 2007 05:34 am

[email protected] 14, 2007 09:32 pm
The USA has oil but the rate of extraction of oil peaked in the USA in the 70's, due to the law of diminishings returns the USA can't extract oil at a significantly higher rate.
Law of diminishing returns, that's gold. :lol:

Why not start using praxeology and quoting Mises while we're at it?
Because the law of diminishing returns explains it.

According to this relationship, in a production system with fixed and variable inputs, beyond some point each additional unit of variable input yields less and less additional output.

That means it becomes more expensive for a smaller increase, eventually you'll hit a 1:1 ratio where you spend all the extra production to get that extra production. [/b]
Actually the law of diminishing returns doesn't work; that was the main point of my Critique of Bourgeois Economics (http://www.revleft.com/index.php?showtopic=56640).

Think about it: the same amount of labor is required to withdraw less oil. There is an increasing amount of labor embodied in a given amount of oil as time increases.

The LTV explains it quite well on its own. No marginalist nonsense needed.

[Psy]

Originally posted by ComradeRed+March 15, 2007 06:01 am--> (ComradeRed @ March 15, 2007 06:01 am)
Originally posted by [email protected] 14, 2007 09:47 pm

Originally posted by [email protected] 15, 2007 05:34 am

[email protected] 14, 2007 09:32 pm
The USA has oil but the rate of extraction of oil peaked in the USA in the 70's, due to the law of diminishings returns the USA can't extract oil at a significantly higher rate.
Law of diminishing returns, that's gold. :lol:

Why not start using praxeology and quoting Mises while we're at it?
Because the law of diminishing returns explains it.

According to this relationship, in a production system with fixed and variable inputs, beyond some point each additional unit of variable input yields less and less additional output.

That means it becomes more expensive for a smaller increase, eventually you'll hit a 1:1 ratio where you spend all the extra production to get that extra production.
Actually the law of diminishing returns doesn't work; that was the main point of my Critique of Bourgeois Economics (http://www.revleft.com/index.php?showtopic=56640).

Think about it: the same amount of labor is required to withdraw less oil. There is an increasing amount of labor embodied in a given amount of oil as time increases.

The LTV explains it quite well on its own. No marginalist nonsense needed.[/b]
Oil is mostly used an a energy source, therefore you should look at how much energy is required to extract vs the energy extracted.

Lets say it takes X megajoules to extract 2X megajoules worth of oil, if to double production it takes 4X megajoules to extract 4X megajoules then there is no net energy gain, if to double again it take 10X megajoules to extract 8X megajoules then there is a net energy loss.

So what you have is less returns on investment in energy with a limit where extra energy extracted is canceled out by the amount of energy needed to extract that extra bit of energy.

[ComradeRed]

Originally posted by [email protected] 15, 2007 06:33 am
Oil is mostly used an a energy source, therefore you should look at how much energy is required to extract vs the energy extracted.
There is no reason to do so, compared to looking at how much labor was needed to extract it.

As Engels pointed out in the Anti-Duhring, when are you going to draw the line for adding energy to the "embodied energy"? Is it the energy to extract it or the energy to make it? If it's the latter, how do you measure that?


Lets say it takes X megajoules to extract 2X megajoules worth of oil, if to double production it takes 4X megajoules to extract 4X megajoules then there is no net energy gain, if to double again it take 10X megajoules to extract 8X megajoules then there is a net energy loss. Great but you have a transformation problem here since you cannot equate this to the "energy embodied" in money.

You couldn't go from energy to prices, and that's a serious problem with the Energy Theory of Value.

Further this is a terrible theory! What about making engines that are more effecient off of a given amount of oil? Then the "2X Megajoules worth of oil" is meaningless. It's an incorrect measurement technique.

You can't simply go around stating "2X Megajoules worth of oil". That's meaningless. That's like saying it takes twenty minutes to get from here to San Francisco. Well, that time changes with the rate of speed you're going.

You have to state the quantity of the oil, then rearrange it such that it's the ratio of the quantity over the energy embodied in it, and then multiply by the given amount of energy to a certain quantity of money. Then the units work out.

[Psy]

Originally posted by ComradeRed+March 15, 2007 05:44 pm--> (ComradeRed @ March 15, 2007 05:44 pm)
Originally posted by [email protected] 15, 2007 06:33 am
Lets say it takes X megajoules to extract 2X megajoules worth of oil, if to double production it takes 4X megajoules to extract 4X megajoules then there is no net energy gain, if to double again it take 10X megajoules to extract 8X megajoules then there is a net energy loss. Great but you have a transformation problem here since you cannot equate this to the "energy embodied" in money.

You couldn't go from energy to prices, and that's a serious problem with the Energy Theory of Value.
[/b]
You don't have to as all your looking at is a net gain, all you are looking at is output-input to find the efficiency of production.


ComradeRed

Further this is a terrible theory! What about making engines that are more effecient off of a given amount of oil? Then the "2X Megajoules worth of oil" is meaningless. It's an incorrect measurement technique.

That is because I simplified it.

The measurement would be based on the efficiency on the extraction process, the efficiency of other inputs would just reduce demand, they won't change the efficiency of extraction. Thus 'X megajoules to extract 2X megajoules' would mean 2x megajoules of oil if that oil was used in the extraction process of oil.

[ComradeRed]

Originally posted by [email protected] 15, 2007 12:35 pm
You don't have to as all your looking at is a net gain, all you are looking at is output-input to find the efficiency of production.
All right but that isn't satisfactory. It has a problem with units.


That is because I simplified it.

The measurement would be based on the efficiency on the extraction process, the efficiency of other inputs would just reduce demand, they won't change the efficiency of extraction. Thus 'X megajoules to extract 2X megajoules' would mean 2x megajoules of oil if that oil was used in the extraction process of oil. No that's not my point.

My point is that an engine takes in X liters of oil and gives out Y megajoules of energy. As time goes on, either X approaches zero or Y goes to infinity.

It doesn't make any sense to say "I extracted X Megajoules of oil" because oil is measured in liters not joules.

It is critical to keep time in play here, which means that it would be impossible to say "I extracted X Megajoules of oil."

What is important is the amount of oil extracted, and the effeciency of engines, at given time.

It seems that your reasoning however is having specks of marginalism, or at least troublingly absurd simplifications and bourgeois terminology.

[Psy]

Originally posted by [email protected] 15, 2007 08:58 pm
My point is that an engine takes in X liters of oil and gives out Y megajoules of energy. As time goes on, either X approaches zero or Y goes to infinity.

It doesn't make any sense to say "I extracted X Megajoules of oil" because oil is measured in liters not joules.

It is critical to keep time in play here, which means that it would be impossible to say "I extracted X Megajoules of oil."

What is important is the amount of oil extracted, and the effeciency of engines, at given time.

It seems that your reasoning however is having specks of marginalism, or at least troublingly absurd simplifications and bourgeois terminology.
Your talking about after the oil is extracted, I am just talking about the extraction of the oil. As you increase the rate of extraction you require more energy for less increases. Eventually you'll hit a point where the extra rate of extraction is canceled out by the extra energy required for that increase.

To look it another way, if it takes the equivalent of X barrels of oil to extract 2X barrels of oil you produced X barrels of oil (for the market). If you double efforts so now you are using the equivalent of 2X barrels of oil to extract 3x, you still produced X barrels of oil. Now if you double it again so you are using the equivalent of 4x barrels of oil to extract 4x barrels of oil, you produced zero barrels of oil.

[ComradeRed]

Originally posted by [email protected] 15, 2007 02:56 pm
Your talking about after the oil is extracted, I am just talking about the extraction of the oil. As you increase the rate of extraction you require more energy for less increases. Eventually you'll hit a point where the extra rate of extraction is canceled out by the extra energy required for that increase.

To look it another way, if it takes the equivalent of X barrels of oil to extract 2X barrels of oil you produced X barrels of oil (for the market). If you double efforts so now you are using the equivalent of 2X barrels of oil to extract 3x, you still produced X barrels of oil. Now if you double it again so you are using the equivalent of 4x barrels of oil to extract 4x barrels of oil, you produced zero barrels of oil.
But the problem is that this is nonlinear in reality; you're using ceteris paribus to have a linear approximation that is valid at only two points (possibly more as the effeciency of machines increase or decrease, but at least two are guarenteed since it's got a "not nice" inverse function).

That's my problem.

We have machines that is basically a function of the amount of oil you put in O and I assert the time T; as time goes on, to produce the same amount of energy, the amount of oil O decreases (lim T->infinity, f(O=constant, T) = infinity or E=constant then lim T->infinity f(O,T)=E requires O->zero mathematically the two are equivalent).

You are basically holding f as a function of oil alone, and then changing the oil output over time.

That is what I object to, since it mathematically is well not really telling any part of the whole story.

[Psy]

Originally posted by ComradeRed+March 15, 2007 11:39 pm--> (ComradeRed @ March 15, 2007 11:39 pm)
[email protected] 15, 2007 02:56 pm
Your talking about after the oil is extracted, I am just talking about the extraction of the oil. As you increase the rate of extraction you require more energy for less increases. Eventually you'll hit a point where the extra rate of extraction is canceled out by the extra energy required for that increase.

To look it another way, if it takes the equivalent of X barrels of oil to extract 2X barrels of oil you produced X barrels of oil (for the market). If you double efforts so now you are using the equivalent of 2X barrels of oil to extract 3x, you still produced X barrels of oil. Now if you double it again so you are using the equivalent of 4x barrels of oil to extract 4x barrels of oil, you produced zero barrels of oil.
But the problem is that this is nonlinear in reality; you're using ceteris paribus to have a linear approximation that is valid at only two points (possibly more as the effeciency of machines increase or decrease, but at least two are guarenteed since it's got a "not nice" inverse function).

That's my problem.

We have machines that is basically a function of the amount of oil you put in O and I assert the time T; as time goes on, to produce the same amount of energy, the amount of oil O decreases (lim T->infinity, f(O=constant, T) = infinity or E=constant then lim T->infinity f(O,T)=E requires O->zero mathematically the two are equivalent).

You are basically holding f as a function of oil alone, and then changing the oil output over time.

That is what I object to, since it mathematically is well not really telling any part of the whole story.[/b]
That still means the rate of extraction is limited by diminishing returns, you have to wait for new technology to overcome the peak in production.

Of course oil is worse since more joules of energy is need to extract oil at the same rate as the oil field ages, so increases in the efficiency of extracting oil has to overcome the aging of the oil field.

[ComradeRed]

Originally posted by [email protected] 15, 2007 04:48 pm
That still means the rate of extraction is limited by diminishing returns, you have to wait for new technology to overcome the peak in production.

Of course oil is worse since more joules of energy is need to extract oil at the same rate as the oil field ages, so increases in the efficiency of extracting oil has to overcome the aging of the oil field.
But then the "proportional return to inputs" breaks down, which is the cornerstone of the "law of diminishing returns".

That's why it's incorrect...like all of bourgeois economics.

[Psy]

Originally posted by ComradeRed+March 16, 2007 12:58 am--> (ComradeRed @ March 16, 2007 12:58 am)
Psy[email protected] 15, 2007 04:48 pm
That still means the rate of extraction is limited by diminishing returns, you have to wait for new technology to overcome the peak in production.

Of course oil is worse since more joules of energy is need to extract oil at the same rate as the oil field ages, so increases in the efficiency of extracting oil has to overcome the aging of the oil field.
But then the "proportional return to inputs" breaks down, which is the cornerstone of the "law of diminishing returns".

That's why it's incorrect...like all of bourgeois economics. [/b]
Actually this is part of physics, though in physics diminishing returns is not a law. But if you start getting diminishing returns, physics would state that at a point energy invested cancels out energy returned thus no net gain of energy occurs.

[ComradeRed]

Originally posted by [email protected] 15, 2007 07:39 pm
Actually this is part of physics, though in physics diminishing returns is not a law. But if you start getting diminishing returns, physics would state that at a point energy invested cancels out energy returned thus no net gain of energy occurs.
Actually no, that's a gross mischaracterization of thermodynamics.

You are thinking of the first law of thermodynamics, by the by: the conservation of energy in a closed system.

Further, because of the nonlinear character of this oil model (which is still not accurate since oil is being made naturally albeit phenomenally slowly) the predictions based off of bourgeois economics how should I say fail completely.

You can call it "Diminishing returns" if you want, but it retains none of its character from bourgeois economics.

[edit]: I've been thinking about this, and diminishing returns wouldn't work; there is no "Return to scale", "MC=MR", or any other conditions/consequences of this marginalist "law". Perhaps you are using it in the Ricardian sense of the term?