Foundational Papers in Complexity Science pp. 581–609
DOI: 10.37911/9781947864528.18
Arrow’s “Learning by Doing” and Complexity Economics
Author: John Geanakoplos, Yale University and Santa Fe Institute
Excerpt
In the 1950s and early 1960s, Bob Solow and other economists built a canonical model of economic growth that made it clear that neither the extraordinary rise in output over the previous two centuries, nor the astounding difference in income across countries, could be explained simply by differences in the accumulation of productive machines or capital. Technological progress had to be the missing factor. But how to model it? Solow et al. made technological progress an exogenous function of time, like Moore’s Law.
Kenneth Arrow (1962) began his paper by saying that “trend projections are basically a confession of ignorance, and what is worse, from a practical viewpoint, they are not policy variables.” He then launched into an interdisciplinary synopsis of learning theories, concluding from them that learning is a product of experience in solving new problems, not repetitive ones. He was also struck by the finding of the aeronautical engineer T. P. Wright (1936) that the labor hours required for the construction of the Nth airframe seem to be a precise decreasing function bN^(−1/3). Similar findings by Hirsch (1956) in other industries led to the notion of the learning curve, which seemed to suggest that building more of the same thing leads to learning.
Bibliography
Aghion, P., and P. Howitt. 1992. “A Model of Growth Through Creative Destruction.” Econometrica 60 (2): 323–351. https://doi.org/10.3386/w3223.
Farmer, J. D., and F. Lafond. 2016. “How Predictable Is Technological Progress?” Research Policy 45 (3): 647–655. https://doi.org/10.1016/j.respol.2015.11.001.
Lucas, R. E. 1988. “On the Mechanics of Economic Development.” Journal of Monetary Economics 22 (1): 3–42. https://doi.org/10.1016/0304-3932(88)90168-7.
Romer, P. M. 1986. “Increasing Returns and Long-Run Growth.” Journal of Political Economy 94 (5): 1002–1037. https://doi.org/10.1086/261420.
—. 1990. “Endogenous Technological Change.” Journal of Political Economy 98 (5, part 2): 71–102. https://doi.org/10.1086/261725.
Solow, R. M. 1956. “A Contribution to the Theory of Economic Growth.” The Quarterly Journal of Economics 70 (1): 65–94. https://doi.org/10.2307/1884513.
—. 1997. Learning from ‘Learning by Doing’: Lessons for Economic Growth. Stanford, CA: Stanford University Press.
Solow, R. M., J. Tobin, C. C. von Weizsäcker, and M. Yaari. 1966. “Neoclassical Growth with Fixed Factor Proportions.” The Review of Economic Studies 33 (2): 79–115. https://doi.org/10.2307/2974435.