Learning from production-related experiences frequently reduces costs: The accumulation of knowledge that is associated with having produced a large volume of output over a considerable time period enables managers to implement more efficient production methods and avoid errors. We give the term learning by doing to this accumulation of knowledge.
Examples abound, but the best known may be the continual improvement in the capacity of computer chips, whose efficiency has doubled about every eighteen months for several decades – a phenomenon known as Moore’s Law. Past experience is key: learning can be a facilitator in economic growth on a national scale. Japan, Korea and Taiwan learned from the West in the seventies and eighties. The phenomenal economic growth of China and India today is made possible by existing knowledge.
Learning by doing can reduce costs. A longer history of production enables firms to accumulate knowledge and thereby implement more efficient production processes.
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