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Law

  The law of diminishing returns

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                                             The law of diminishing returns

The law of diminishing marginal returns argues that at a certain level adding a factor of production would result in a decrease in production.  An example is when production in a factory has reached the optimal level, adding labor factor while holding other factors constant may not end up increasing production but a decrease in production. With other factors of production being helped constant, adding employees beyond the optimal level of production would result in a decreased level of efficiency in production (Layson, 2015).  The Law of diminishing returns is also referred to as the principle of diminishing marginal productivity or the law of variable proportions.

If more of one of the factors of production is added ceteris paribus, there will be decreased per unit incremental yield. The idea behind the law of diminishing returns is tied to earlier economists such as Thomas Robert Malthus and other classical economists such as Ricardo who was able to express how additional capital and labor when added to a fixed portion of land would generate smaller increases in output (Layson, 2015). Ideally, if variable factors of production are added to the fixed portion of capital and land there would be an increase in total production and then a fall in total production.

                                   Military as a significant area of government spending

The spending by governments across the globe tends to cover several services.  Education, infrastructure, health services, defense, and agriculture are the major areas where governments such as the Federal Government in the U.S spend a significant amount of the budget. If a government has spent more than it receives in taxes, it ends up running a budget deficit. When the government receives more taxes and spends less, it tends to have a budget surplus. When the taxes and spending are equal, it is said to have a balanced budget. In 2009 for instance, the U.S Government spent more than it had received in taxes. It, therefore, runs a deficit of about $1.4 trillion deficit. This was almost 10% of the U.S GDP by 2014 (Amadeo, 2018).

Each financial year, many governments have to borrow funds from citizens in the form of taxes and from foreigners so that it can cover its budget deficits. The government may also borrow externally and internally to help in spending through selling securities such as notes bills and treasury bonds. From 1961 to 1997 the U.S government has experienced budget deficits while from 1998 to 2001, the government experienced budget surpluses (Amadeo, 2018). Military spending has been pointed out as one of the spending areas that has increased the current budget deficits as well as the U.S debt. Economists argue that top reduces military and defense spending, Department of Defense (DoD) must cut on the civilian workforce as well as benefits and military bases around the world.

In the fiscal year 2019 the national defense was the largest discretionary expenditure. The national defense spending in 2019 by the U.S Federal Government was $678 billion which was greater than another defense spending of the next nine largest economies in the world. It is estimated that the U.S military spending in the period Oct 1, 2020, to September 30, 2021, will be $934 billion which will make it the second-largest spending after social security (Amadeo, 2018). Spending on defense includes acquisition of military equipment, military reconnaissance programs, military research and development, DoD overseers operations among other expenses.

 

 

 

References

Amadeo, K. (2018). US Military Budget, Its Components, Challenges, and Growth: Why Military Spending Is More than You Think It Is. The Balance, updated, 14.

Layson, S. K. (2015). The increasing returns to scale CES production function and the law of diminishing marginal returns. Southern Economic Journal, 82(2), 408-415.

 

 

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