Physical capital and diminishing returns
Religion & Liberty Online

Physical capital and diminishing returns

Note: This is post #81 in a weekly video series on basic economics.

How did Germany and Japan achieve record economic growth following World War II? A primary reason is physical capital.

In this video by Marginal Revolution University, Alex Tabarrok explains two specific concepts that deal with physical capital and the success of Germany and Japan. The first is the iron logic of diminishing returns which states that, for each new input of capital, there is less and less output produced. The second concept we’ll cover is the marginal product of capital. This concept is the output created by each new unit of invested capital.

(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Click here to see other videos in the Introduction to Economics series.

Joe Carter

Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).