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Why the need to manage a broader portfolio of assets?
Assets and diminishing returns
Most assets are also subject to diminishing marginal returns. The benefits to
well-being or to productivity of an additional unit of an asset declines as the
level or quality of the asset rises (all other assets kept constant). Why? As
J.B. Clark said, "Put one man only in a square mile of prairie, and he will get
a rich return. Two laborers on the same ground will get less per man; and if
you enlarge the force to ten, the last man will perhaps get wages only."
27 As more people are added, the field gets crowded and the
people eventually get in each other's way.
nly if there are very strong positive spillovers associated with an asset is
the tendency of diminishing marginal returns offset. That is true for
knowledge, particularly codified knowledge. Because new knowledge complements
existing knowledge (there is no crowding out, as with the laborers), it is more
valuable the more society already knows. Similarly, it is true for networks,
such as telephones, where the advantages of owning a telephone increase with
each new member in the network. So too for trust and
social capital.
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