I think so. At any one point in time, at the frontier of human knowledge, there are many research proposals floating around for what direction we should next expand the frontier. Some of these proposals will lead to valuable gains in knowledge, and profitable technologies. Most will amount to nothing, or at most a footnote in a more important work. It becomes clear after the fact that the funding money should have been invested elsewhere.
So if you are a funding agency, you rank the proposals from best to worst. If you continuously added money to the agencies budget, the quality of the proposals would get lower and lower. I believe that is what one means by diminishing returns.
"Diminishing returns" also means next to nothing. Technically speaking, it means that the second derivative of output with respect to input is negative, when we care about the first. For example, you exhibit "diminishing returns" for each calorie you eat-- the first 500 is far more important than the second 500-- but this doesn't mean you eat only 500 calories per day.
What actually matters is not whether returns diminish, because this tends to happen right away if inputs are allocated to the most efficient projects, but the point where the marginal value gained is less than the cost of the input.
"For example, you exhibit "diminishing returns" for each calorie you eat-- the first 500 is far more important than the second 500-- but this doesn't mean you eat only 500 calories per day."
No, but it does mean there exists a point where you should stop eating more calories.
So if you are a funding agency, you rank the proposals from best to worst. If you continuously added money to the agencies budget, the quality of the proposals would get lower and lower. I believe that is what one means by diminishing returns.