Learning-by-doing (economics)

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.

For John Dewey's theory of education, see Learning-by-doing.

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

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