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, the quantification of the idea was realised from the manufacturing of B17 Flying Fortress bombers during world war II. 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 or with solar PV production.
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.
Robert Lucas, Jr. adopted the concept to explain increasing returns to embodied
human capital.
Xiaokai Yang and
Jeff Borland have shown learning-by-doing plays a role in the evolution of countries to greater specialisation in production.
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.
The
Toyota Production System is known for
Kaizen, that is explicitly built upon learning-by-doing effects.
See also
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References
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Production economics
Economic growth