Learning-by-doing is a concept

Concept

The word concept is used in ordinary language as well as in almost all academic disciplines. Particularly in philosophy, psychology and cognitive sciences the term is much used and much discussed. WordNet defines concept: "conception, construct ". However, the meaning of the term concept is much...

 within economic theory. It refers to the capability of workers to improve their productivity by regularly repeating the same type of action. The increased productivity

Productivity

Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

 is achieved through practice, self-perfection and minor innovation

Innovation

Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

s.

The concept of learning-by-doing has been used by Kenneth Arrow

Kenneth Arrow

Kenneth Joseph Arrow is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51....

 in his design of endogenous growth theory

Endogenous growth theory

Endogenous growth theory holds that economic growth is primarily the result of endogenous and not external force. In Endogenous growth theory investment in human capital, innovation and knowledge are significant contributors to economic growth. The theory also focus on positive externalities and...

 to explain effects of innovation and technical change. Robert Lucas, Jr.

Robert Lucas, Jr.

Robert Emerson Lucas, Jr. is an American economist at the University of Chicago. He received the Nobel Prize in Economics in 1995 and is consistently indexed among the top 10 economists in the Research Papers in Economics rankings. He is married to economist Nancy Stokey.He received his B.A. in...

 (1988) adopted the concept to explain increasing returns to embodied human capital. Yang and Borland (1991) 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

Evolutionary economics

Evolutionary economics is part of mainstream economics as well as heterodox school of economic thought that is inspired by evolutionary biology...

 and Resource-Based View (RBV)

Resource-Based View

The resource-based view is a business management tool used to determine the strategic resources available to a company. The fundamental principle of the RBV is that the basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable resources at the firm's...

 of the firm.

Toyota Production System

Toyota Production System

The Toyota Production System is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers...

 is known for Kaizen

Kaizen

, Japanese for "improvement", or "change for the better" refers to philosophy or practices that focus upon continuous improvement of processes in manufacturing, engineering, game development, and business management. It has been applied in healthcare, psychotherapy, life-coaching, government,...

, that is explicitly built upon learning-by-doing effects.

Progress Ratio

Learning by doing is often measured by progress ratios. This number represents the cost of production after cumulative production doubles. Dutton and Thomas (1984) survey various industries and find the ratio to be typically around 80%. Thus, if a good has progress ratio of 80% and costs 100$ to produce after producing 100 units, when cumulative production reaches 200 units, it will cost $80 to produce. Formally, for some commodity, if Cost(t) is cost at time, t, d(t) is the number of doublings of cumulative output of the commodity in time, t, and a is the percent reduction in cost for each doubling of cumulative output (note: 1-a is the progress ratio), then we have Cost(t) = Cost(0)(1-a)^d.

Technology	Period	Year 1 Production	Cumulative Production	Cost Index	Progress Ratio
Ford Model T Auto	1909-1923	15,741	8,028,000	0.290	87%
Integrated Circuits	1962-1968	4 million units	828 million units	0.047	67%
CFC Substitutes	1988-1999	100,000 tons	3,871,000 tons	0.690	93%
Scrubbers	1987-1995	65.8 GW	84.3 GW	0.	89%
Photovoltaic	1971-2000	0.1	1451.4	0.042	72%
Magnetic Ballasts	1977-1993	29.4 million	629.3 million	0.897	97%
Electronic Ballasts	1986-2001	431,000	350 million units	0.277	88%
Refrigerators	1980-1998	5.1 million	126.3 million	0.556	88%
Freezers	1980-1998	1.8 million	26.1 million	0.374	78%
Clothes Washers	1980-1998	4.4 million	104.7 million	0.536	87%
Electronic Clothes	1980-1998	2.5 million	61.0 million	0.557	88%
Gas Clothes Dryer	1980-1998	0.7 million	18.2 million	0.593	90%
Dishwasher	1980-1998	2.7 million	69.7 million	0.450	84%
Room Air Conditioner	1980-1998	2.4 million	63.3 million	0.478	85%
Selective Window Coatings	1992-2000	4.8 million m²	157.4 million m²	0.394	83%