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Invention and Bounded Learning by Doing

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  • Alwyn Young

Abstract

This paper presents a model of the interaction between invention and learning by doing. Learning depends upon invention in that learning by doing is viewed as the serendipitous exploration of the finite productive potential of invented technologies. At the same time, the profitability of costly invention is dependent upon learning in that costs of production depend upon the society's aggregate historical learning experience. The resulting model is a true hybrid. With small markets, the profitability of invention is low, and hence the rate of invention becomes the constraining factor in growth. With large markets, invention is very profitable and tends to pull ahead of the society's learning experience. The consequent growing gap between the technological frontier and the society's industrial maturity squeezes returns, leading to an equilibrium in which the rate of invention (and growth) is paced by the society's rate of learning.

Suggested Citation

  • Alwyn Young, 1991. "Invention and Bounded Learning by Doing," NBER Working Papers 3712, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3712
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    5. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
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    7. Drew Fudenberg & Jean Tirole, 1983. "Learning-by-Doing and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 522-530, Autumn.
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    3. Goren, Amir, 2016. "Inequality, Technical Change or Leverage?," MPRA Paper 72983, University Library of Munich, Germany.

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