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How the Law of Diminishing Returns Helps BP

The law of diminishing returns posits that the impact of the last unit of an economic good (or bad) has much less of an impact than the first unit. In fact, the impact starts to diminish with the second unit, and therefore get progressively less.

So people say things like "BP way underestimated the spill rate, it's not 1,000 gallons a day, but rather 100,000 gallons. They then multiply up the damage in a linear fashion.

That might not be the case. It's more like, the first 1,000 barrels a day does most of the damage, and after that, one hundred times more oil doesn't do proportionately as much. Sure, there's a greater weight with a larger number, but the proportion might be five or ten times, rather than 100 times. That's because the remaining 99,000 barrels doesn't do 100 time the damage, but more like the same damage 100 times. Or put another way, ONE well with 100,000 barrels a day wouldn't do nearly as much damage as 100 (widely separated) wells of 1,000 barrels a day.

One thing that much invalidate my thesis is something like a hurricane, or something of that sort. If winds move oil significantly, then you could get something more like 100 instances of 1,000 barrels a day. But that might just last for a day or two.