Do you believe in the Law of Diminishing Returns in Audio?

[peguinpower]

It seems to be in vogue. Video after video is posted on it.

and then I saw this comment....

"The Law of Marginal Diminishing Returns is a measure of production. Its about input and output. It is not a measure of value. Arguing its applicability to high end audio is incorrect. You are trying to associate a measure of production to a measure of value. It is foolish. Diminishing returns does not apply. It would be like arguing electricity is governed by Demand and Supply. Value is subjective to the owner and his appreciation of the gear purchased."

I did study some economics, and confirmed this to be true. One does not apply the Law of Diminishing Returns to value. Unless you are talking about buying and selling. If we are talking about whether its worth the money or not, that is entirely subjective.

Well, let me clarify subjective. It may be worth it to me, but we always have a choir of crusty negative Nancy's who always have an opinion on how other people spend their money.

 

[Hajidub]

On the video, chose SHARE, then copy link. Paste in your post.

 

[nj pheonix]

Seems pretty straight forward.
Gear obviously gets better as it gets more expensive ( not because it's more expensive)
You might get 10x the sound from 10 to 100, you might get 10x the sound from 100 to 1000, I'll go out on a limb and say you might get 10x the sound from 1000 to 10000. From 10000 to 100000 you're not upping the quality of the system 10x . If you go from 100k to 1M . Your sound quality won't improve 10x. Likewise if you went from 1M to 10M
Clearly I'm not saying the systems aren't improving as the price goes up . At some point the systems start to get very accurate ! The changes will get subtler at some point. Carried to the logical end at some point its conceivable that the system won't actually improve. I'm not guessing where that point is and everybody should feel free to explore this if it's their desire. Logic clearly leads you to this conclusion.

 

[nj pheonix]

One other thought , clearly every 1000, 10, 000 , 100,000 , million dollar system system isn't equal ( to their own price point ) Different spaces require different speakers, room treatments so there is no linear comparison.

 

[spark1]

OP, I think your conclusion that the notion of diminishing returns does not apply to product quality or performance is overly pedantic. While true that in the field of economics the concept is applicable to productivity, like many such concepts it has moved into the more general lexicon.

As such, the notion of diminishing returns simply defines the point at which increases in expenditure begin to provide successively lower gains in product quality or performance. It seems fairly obvious, at least to me, that this is the case with many products...especially those in the category of discretionary or luxury goods (such as audio gear). It is not reasonable, at least to me, to suggest that for each doubling of amount spent, product performance also doubles. At some point, the gain derived from each incremental dollar spent begins to decline.

This does not mean that additional expenditures are not worthwhile...only that at some point the cost of better performance becomes increasingly expensive.

EDIT: FWIW, my graduate degree is in economics...but was so long ago that the Econ Dept was in the College of Social Sciences.

 

[peguinpower]

Seems pretty straight forward.
Gear obviously gets better as it gets more expensive ( not because it's more expensive)
You might get 10x the sound from 10 to 100, you might get 10x the sound from 100 to 1000, I'll go out on a limb and say you might get 10x the sound from 1000 to 10000. From 10000 to 100000 you're not upping the quality of the system 10x . If you go from 100k to 1M . Your sound quality won't improve 10x. Likewise if you went from 1M to 10M
Clearly I'm not saying the systems aren't improving as the price goes up . At some point the systems start to get very accurate ! The changes will get subtler at some point. Carried to the logical end at some point its conceivable that the system won't actually improve. I'm not guessing where that point is and everybody should feel free to explore this if it's their desire. Logic clearly leads you to this conclusion.

except for “Gear obviously gets better as it gets more expensive ( not because it's more expensive)” I agree with the rest your statement. My only objection is that concept is not covered by "The Law of Dimishing Returns". That is an erroneous use of the concept.

A more appropriate concept is Cost Benefit. Comparing cost and benefits (including intangibles) using aggregate information.

Using Cost Benefit and using a buying criteria that includes enjoyment seems more appropriate. Who wants a 500 dollar system that they don't enjoy, when a 700 dollar system would get them there? Enjoyment to me, is the true measure, and my ultimate objective.

I'm too old to buy something I dont like, when something I do is within reach.

 

[peguinpower]

OP, I think your conclusion that the notion of diminishing returns does not apply to product quality or performance is overly pedantic. While true that in the field of economics the concept is applicable to productivity, like many such concepts it has moved into the more general lexicon.

As such, the notion of diminishing returns simply defines the point at which increases in expenditure begin to provide successively lower gains in product quality or performance. It seems fairly obvious, at least to me, that this is the case with many products...especially those in the category of discretionary or luxury goods (such as audio gear). It is not reasonable, at least to me, to suggest that for each doubling of amount spent, product performance also doubles. At some point, the gain derived from each incremental dollar spent begins to decline.

This does not mean that additional expenditures are not worthwhile...only that at some point the cost of better performance becomes increasingly expensive.

EDIT: FWIW, my graduate degree is in economics...but was so long ago that the Econ Dept was in the College of Social Sciences.

I do not feel any sort of return (of performance) is in the equation. I explained that above.

As a trained economist, you may or may not appreciate my attempt at framing the cost and the buying decisions of audio gear in the proper context. The analysis of cost vs performance, to me, is entirely the wrong way to look at a leisure/recreational pursuit.

For example, do you put a price on +/- 1 db frequency response from 10hz to 100khz as a return, and then declare the return as sub par? Or, is it more appropriate to ask someone, how do you feel about that Denon amp upgrade? Did you like it? A lot of people think of this hobby like it was a business. I do not, and so do a lot of people I know.

To me audio is closer in comparison to good food or good liquor. I can say if a 50 dollar dinner was worth it or not, or if I enjoyed a 30 dollar bottle of whiskey or not. I do not compute the protein content or the alcohol level, nothing like that. Just imagine telling your wife you are going to New Jersey instead of Paris because the Law of Diminishing Returns says so I buy what I want, within reason.

Alternatively, I'd use the law of diminishing returns in buying a generator. Cost vs Kwh.

You think differently. Thats cool. Thank you for your note.

 

[Alobar]

Almost impossible to quantify sound quality, or build quality. Even more difficult to assign either quality a value. There are those who attempt to do so with specs, still others just listen with their ears, probably more choose from others opinions. Some its a status thing, but I think most of the GP would agree with diminishing returns, as to which sound bar to get at Costco. I used to believe in diminishing returns in audio, but don't anymore.

 

[peguinpower]

Almost impossible to quantify sound quality, or build quality. Even more difficult to assign either quality a value. There are those who attempt to do so with specs, still others just listen with their ears, probably more choose from others opinions. Some its a status thing, but I think most of the GP would agree with diminishing returns, as to which sound bar to get at Costco. I used to believe in diminishing returns in audio, but don't anymore.

Choosing that piano black finish on a speaker, using the law of diminishing returns, is totally unjustified. Cigars? Cars?

Im glad to know Im not alone in my thinking.

 

[Guest159]

I never thought much of the concept of diminishing returns applying to the perceived value of a thing in audio, but rather to how much research, materials, and production time required to produce a level of performance which is reflected in the price. There's clearly a point where achieving the next 10% of performance requires an ungodly amount of investment, whether it be speakers, computers, race cars, fashion, music, or athletics. People who achieve the top 1% of succession in just about any human endeavor have laid down WAY more investment in time, effort, and resources that the people who were satisfied with being in the top 10 or 15%. Sure, arguing that there's a fallacy in likening diminishing return to perceived value is accurate, but that's a bit of a straw man in that it presumes that research, materials, and workmanship aren't related to the value of the thing. F1 cars aren't insanely expensive because they look really cool. They're insanely expensive because the represent insane research, materials, and workmanship.

 

[peguinpower]

^^^ that is an interesting POV. You arent focused on the owners perceived value, but the cost to produce, and possibly the producers desired return for the value he created.

In my line of business, when I ask to produce something unique or complex, I often hear “anything is possible as long as you are willing to invest the necessary resources”

 

[spark1]

Just because incremental gains in performance/satisfaction/perceived quality become increasingly expensive does not mean they are not justified.

 

[peguinpower]

Just because incremental gains in performance/satisfaction/perceived quality become increasingly expensive does not mean they are not justified.

i agree. I would add “dependent on the buyer”.

One person may be overjoyed. And the another says meh. The benefit may not be equal.

 

[Alobar]

Maybe this is a play on words, but as one climbs the audio ladder, providing there is a gain in quality of some sort no matter its cost, there isn't a "diminishing return" but possibly a lower rate of gain in returns.

No economics degree here, but diminishing return would be a diminishing quality (as in worse sound,/quality build etc) wouldn't it?

 

[spark1]

Maybe this is a play on words, but as one climbs the audio ladder, providing there is a gain in quality of some sort no matter its cost, there isn't a "diminishing return" but possibly a lower rate of gain in returns.

That's what a diminishing return IS...a reduced rate of return on each additional dollar invested.

 

[Bob in WI]

Law of diminishing returns as I remember it is that doubling inputs does not double output. Furthermore, as more input is added, the incremental increase in output diminishes.
For example, lets say (just for example) that 2 X input gets you 1.9X output (Output increase = 95% of change in input).
But 5 x input will increase output 4X (Output = 80% of input increase).
If inputs increased 10 times, output is increased sixfold (Output increase = 60% of input increase)
And so on. Additional incremental increases in inputs result in decreasing incremental changes in output.

It is used in production modeling ( doubling the # of labor hours does not double production) and in non production modeling (does ice melt twice as fast if heat increased from 10 degrees C to 20 degrees C?)

I do believe it has a place in audio just like it has a place in computers (doubling the # of transistors on a chip does not double computer speed or make a user complete a spreadsheet in 1/2 the time).
Increasing amp power from 100 to 500 watts may improve performance of some speakers markedly. Add another 400 watts, has the performance increase doubled? Likely not.
A 4 way speaker may sound twice as good as a 3 way, would a 6 way speaker sound that many multiple better? Likely not.
A $200 pair of headphones may sound twice as good as $100 earbuds. Will $400 headphones sound 4x as good? Maybe - you would have to run an experiment but again, likely not.

But it is all very difficult to use in the real world because there are so many variables.

Still, I do think it certainly applies to audio as we know it but it is not absolute. There are too many variables.
The point is adding $5000 worth of components to a $ 5000 system ($5000 to $10000 system cost) will get you a greater audible benefit than adding $5000 worth of components to a $100000 system ($100000 to $105000 system cost).
You got a lot more benefit from the first $5000 than the last $5000 added.

From an economic point of view, the Law of Diminishing returns becomes fun because at some point, increasing inputs actually decreases output. But thats not pertinent to audio( unless your 1000 watt amp blows your speakers).
I hope I was able to explain myself clearly. It has been some time since I dealt with such things. Its fun stuff & useful in the real world but like I said, it is difficult to account for all variables.

 

[Ohighway]

It seems to be in vogue. Video after video is posted on it.

and then I saw this comment....

"The Law of Marginal Diminishing Returns is a measure of production. Its about input and output. It is not a measure of value. Arguing its applicability to high end audio is incorrect. You are trying to associate a measure of production to a measure of value. It is foolish. Diminishing returns does not apply. It would be like arguing electricity is governed by Demand and Supply. Value is subjective to the owner and his appreciation of the gear purchased."

I did study some economics, and confirmed this to be true. One does not apply the Law of Diminishing Returns to value. Unless you are talking about buying and selling. If we are talking about whether its worth the money or not, that is entirely subjective.

Well, let me clarify subjective. It may be worth it to me, but we always have a choir of crusty negative Nancy's who always have an opinion on how other people spend their money.

 

[Bob in WI]

Almost impossible to quantify sound quality,

It can be measured. There are instruments many times more perceptive than the human ear. SQ absolutely can be measured.
Sound preference can not be measured.

I like Blue, you like yellow - luminosity & vibrancy & faithfulness to the ideal on the color wheel can be measured. My blue may measure the same as your yellow.
I still prefer blue. But they measure the same.

 

[Alobar]

It can be measured. There are instruments many times more perceptive than the human ear. SQ absolutely can be measured.
Sound preference can not be measured.

I like Blue, you like yellow - luminosity & vibrancy & faithfulness to the ideal on the color wheel can be measured. My blue may measure the same as your yellow.
I still prefer blue. But they measure the same.

Sure, specs can tell a part of the story, and that is real. However we are talking subjectivity here, and if I'm a fan of yellow, then I will for that, spend more than the average person would.

Is that 100 bottle of red worth 10 times as much as the 10 dollar one? To some, yes sir. But not to me.. So a diminishing return to me would look much different to a wine person..

 

[Alobar]

But it is all very difficult to use in the real world because there are so many variables.

Yes, I get the inputs and outputs theory, but what about build quality? Is that x plastic speaker which has great specs in the same ballpark to y speaker, a walnut work of art costing thousands more? Is THAT what diminishing returns means???