• Human capital accumulation: Finally, human capital accumulation can also offset the effects of diminishing returns. Human capital accumulation refers to the process of increasing the skills and knowledge of the workforce. This can lead to workers being more productive, even when there are diminishing returns from additional investments in physical capital.

So, while the theory of diminishing returns suggests that productivity growth should slow down as economies invest more in physical capital and human capital, there are a number of factors that can offset these effects. These factors include technological progress, innovation, and human capital accumulation.

However, it is important to note that the theory of diminishing returns is still a valid one. It is just that the factors mentioned above can help to delay the onset of diminishing returns and keep productivity growth high for longer periods of time.

In addition, it is important to consider the concept of total factor productivity (TFP) when thinking about productivity growth. TFP is a measure of the efficiency with which inputs (such as labor and capital) are used to produce outputs. TFP can grow even when there are diminishing returns to individual inputs, as long as there are ways to use inputs more efficiently.

So, while the theory of diminishing returns does not apply perfectly to the real world, it is still a useful tool for understanding productivity growth.