10/14/2005

Law of Diminishing Marginal Returns

I attended the Mountain Plains Business Conference and had the opportunity to hear Doctor Tufte's presentation, titled "Models and Growth of Faiths and Their Faithful." He related the growth of faiths or organizations promoting beliefs to the Solow Growth Model. One of the questions was, "What does the model tell us about faiths' adherent growth rate?" The point was made that a faith that encourages adherant growth will have to compensate with more mission work, or in economic terms, more capital. I thought the point interesting, and thought about the LDS missionary system. The LDS church actually increased the number of missionaries (capital) in an effort to gain more converts (output), but what they found was the law of diminishing marginal returns. They reached a certain point where the additional output gained from an additional missionary began to decline. So now, the church has reduced the number of missionaries back to the point where marginal product is still growing. This goes to show that economics can be applied almost everywhere.

3 comments:

sara said...

Professor Tufte is the man. I wish that I would have had a chance to listen to that lecture because it sounds really fascinating. The LDS missionary part really makes a lot of sense. I never have thought about it like that, but the whole concept has really got my wheels turning.

Elijah said...

Well, I understand what you are saying on the whole "...diminishing returns" part for the LDS church, but i highly doubt that they said,"Hmm, let's reduce the amount of missionaries so that we get the most out of the missionary system." I, too, attended Dr. Tufte's presentation (and didn't realize that you had posted this before I had posted mine!) and took another view point from what he was saying. First off, I don't know if you're LDS, but i am and know that they allow pretty much any one who wants to to become a missionary. So the whole idea of applying the diminishing returns concept probably didn't come into play with the church. Secondly, i guess that i took the opinion that promoting one's product was the key concept. It was the fact that firms who choose to advertise and work to promote their product, are going to be more successful that those who don't. Similarly, religions who don't work to grow, won't.

Dr. Tufte said...

Ann is more perceptive than she guesses.

I am not LDS but I do live here and I did hear about the reduction in missionaries. And ... it did get me thinking about this decision as a business decision; an LDS member may not have heard the statements of LDS church officials the same way I did (which is Elijah's point).

To me, it sounded a whole lot like a business focusing on its core competencies. They were very specific in saying that they were cutting back on missionaries because the quality of the marginal ones was not high enough. That's a pretty explicit statement that the marginal productivity of missionaries is too low because they are being stretched too thin.

Now, with all due respect, I'm going to send Elijah off to do some research. The LDS church did have a policy of much broader acceptance of missionary applicants, and about 2 years ago it announced that it was going to be more selective. At the time, Art Porter - who had just gotten back from a missionary presidency in Argentina - indicated over lunch that this was a much needed change.