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Learning-by-doing (economics)

From Wikipedia - Reading time: 4 min
For John Dewey's theory of education, see Learning-by-doing.

Learning-by-doing is a concept in economic theory by which productivity is achieved through practice, self-perfection and minor innovations. An example is a factory that increases output by learning how to use equipment better without adding workers or investing significant amounts of capital.

With roots all the way by to Adam Smith's analysis of pin manufacturing,[1] the quantification of the idea was realised from the manufacturing of B17 Flying Fortress bombers during world war II.[2] For B17's the costs reduced proportionally with the cumulative manufacturing, rather than with ongoing volume. This explains the non-linearity of learning-by-doing cost reduction, as seen for example in semiconductor manufacturing[3] or with solar PV production.[4]

The concept of learning-by-doing has been used by Kenneth Arrow in his design of endogenous growth theory to explain effects of innovation and technical change.[5] Robert Lucas, Jr. adopted the concept to explain increasing returns to embodied human capital.[6] Xiaokai Yang and Jeff Borland have shown learning-by-doing plays a role in the evolution of countries to greater specialisation in production.[7] In both these cases, learning-by-doing and increasing returns provide an engine for long run growth.

Recently, it has become a popular explaining concept in the evolutionary economics and resource-based view (RBV) of the firm.[citation needed]

The Toyota Production System is known for Kaizen, that is explicitly built upon learning-by-doing effects.[citation needed]

See also

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  • Experience curve effects – Express the relationship between experience producing a good and the efficiency of that production
  • Learning curve – Relationship between proficiency and experience

References

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  1. ^ Pratten, Clifford F. (1980). "The Manufacture of Pins". Journal of Economic Literature. 18 (1): 93–96. ISSN 0022-0515. JSTOR 2723893.
  2. ^ Learning by doing in markets, firms, and countries. Chicago, Ill: University of Chicago Press. 1999. ISBN 0-226-46832-1.
  3. ^ Irwin, Douglas A.; Klenow, Peter J. (December 1994). "Learning-by-Doing Spillovers in the Semiconductor Industry". Journal of Political Economy. 102 (6): 1200–1227. doi:10.1086/261968.
  4. ^ Kavlak, Goksin; McNerney, James; Trancik, Jessika E. (December 2018). "Evaluating the causes of cost reduction in photovoltaic modules". Energy Policy. 123: 700–710. Bibcode:2018EnPol.123..700K. doi:10.1016/j.enpol.2018.08.015. hdl:1721.1/123492.
  5. ^ Arrow, Kenneth J. (1962). "The Economic Implications of Learning by Doing". The Review of Economic Studies. 29 (3): 155–173. doi:10.2307/2295952. ISSN 0034-6527. JSTOR 2295952.
  6. ^ Lucas, Robert E. (1988). "On the mechanics of economic development". Journal of Monetary Economics. 22 (1): 3–42. doi:10.1016/0304-3932(88)90168-7. ISSN 0304-3932.
  7. ^ Yang, Xiaokai; Borland, Jeff (1991). "A Microeconomic Mechanism for Economic Growth". Journal of Political Economy. 99 (3): 460–482. doi:10.1086/261762. ISSN 0022-3808. JSTOR 2937738.
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