The learning curve: the meaning, the origins, how it works and when this tool is used in economics.When we talk about learning we are referring to the set of conditions that lead to an optimization of results based on the repetition of one or more actions. In economics , the learning curve , not to be confused with the experience curve, is the graphic representation of the concept that describes how new skills or knowledge can be rapidly acquired initially, even if learning becomes much slower later. At first, a minimum investment of resources produces significant results, to then stabilize at average levels. Let’s see how to study the learning curve .
The Origins of the Learning Curve
The learning curve was first described by psychologist Hermann Ebbinghaus in 1885 and further elaborated by psychologist Arthur Bills in 1934. It is a graphic representation of the phenomenon explained by Theodore P. Wright in his ” Factors Affecting the Cost of Aircraft ” in 1936, in which the aeronautical engineer refers to the effect that learning has had on labor productivity in the aircraft industry, which translates into a relationship between the cumulative number of units produced (X) and the average time per unit (Y). The curve usually has a convex shape, which indicates how the incidence of the initial stages is decisive.
How the learning curve works
If the reductions in product costs are made known to the various buyers, the price necessarily decreases, thus making a higher profit margin available to the company. In most cases, however, companies tend to drastically increase their market share to obtain an economic advantage that they could not otherwise achieve.
The reduction in costs, caused by companies and therefore by the economy, is simply represented graphically by a curve, which in addition to being defined as a learning curve is also often called an experience curve .
The learning curve has the peculiarity of being monotonously decreasing, in fact, it is possible to notice that its trend is greater when it comes to the first production batches, tending to zero as time goes by, since the company will not be able to obtain further benefits after having reached the maximum advantage.
Using the learning curve
The learning curve is not only used as a strategic tool for production competitiveness, but is also used to design specific production systems, always taking into account that variations may occur over time.
Note how the typical learning curve in logarithmic scale takes a straight line, which indicates its exponential nature. The real curves only approximate the ideal one, but they still maintain the underlying trend.
Finally, learning comes from specific factors called “discrete”, as they occur following particular events. In a modal analysis, that is, based on the individual elements that then constitute the curve, it is possible to isolate the various exponential components that contribute to forming the curve in a system with many variables.
