The Economic Implications of Learning by Doing

Posted: 17 Nov 2009

See all articles by Kenneth J. Arrow

Kenneth J. Arrow

Stanford University - Department of Economics

Date Written: 1962


Demonstrates that technical change is attributable to experience. The cumulative production of capital goods is used as the index of experience. New capital goods are assumed to completely embody technical change. The assumption is made that the model will be operating in an environment of full employment although reference is made throughout to the case of capital shortage. The implications of this model on wage earners are discussed, and profits and investments are examined. The rate of return is determined by the expected rate of increase in wages, current labor costs per unit output, and the physical lifetime of the investment. Learning is an act of investment that benefits future investors. Further analysis shows that the socially optimal ratio of gross investment to output is higher than the competitive level. (SRD)

Keywords: Knowledge production, Learning theory, Capital goods, Experience, Technology acquisition, Human capital, Experiential learning, Organizational learning, Technological change

Suggested Citation

Arrow, Kenneth J., The Economic Implications of Learning by Doing (1962). The Review of Economic Studies, Vol. 29, Issue 3, p. 155-173 1962. Available at SSRN:

Kenneth J. Arrow (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

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