The Law pf Diminishing Returns is a basic law of economics.
It says that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield are smaller.
The classic example is of a farmer who has, say, four workers picking cotton on his property. He figures that if he increases the number to eight, the cotton picking will be completed wice as fast. Intrigued, after seeing that worked, he doubles the number of workers to sixteen.
But now there are so many workers picking cotton, that they are falling over each other. Lo and behold, his labor cost has increased whereas the amount of cotton picked by each worker has decreased. The net result is that his cost of labor has increased, whereas his production per worker has decreased.
The Law of Diminishing Returns can easily be applied to the number of real estate agents there are in the universe.
The number of people who want to sell their homes or buy a different one at any one time, in the main, has no significance to the number of real estate agents who are in the market looking for clients.
But the number of agents, continuing to increase, reduces the productivity of the majority of agents.
The NAR’s business objective is to increase the number of agents, without considering whether or not the increase is needed. That is the same objective as that of local Associations and of most franchise companies.
However, the business objective of each licensed agent is to have enough prospects to make what he/she considers an effective living.
Note that the NAR, local Association, and that of most franchises' objectives ignores the Law of Diminishing Returns; while the licensed agents’ objective wishes that they would abide by the Law of Diminishing Returns.
Bill Cherry, Realtor
Dallas
214 503-8563
Comments(26)