Is there a difference between the meanings of the terms "economies of scale" and "learning curve"?

The term "learning curve" is being used by cost estimators and refers (more or less) to the idea that businesses will have a higher cost per item if they make relatively few products but will have a lower cost per item if they make more products.

I thought this concept sounded similar to decreasing marginal cost within the economies of scale. Unfortunately, I haven't been able to find information to prove that they mean the same thing.

Can anyone confirm?


1 Answer 1


Consider a production function

$$y = F(A,K,L)$$

where $A$ represent "technology" (in the broad sense including for example also organizational technology), $K$ is capital and $L$ is labor (again both broadly defined)

"Economies of scale" (a looser synonym of increasing returns to scale), is, in economics, always defined with respect to all arguments in the production function except technology.

We say that the production function exhibits increasing returns to scale if it is homogeneous of degree higher than one... but with respect to capital and labor only:

$$F(A, sK, sL) = s^{\delta}F(A, K, L), \;\; \delta > 1$$

Note that we have not multiplied $A$ by $s$. Note also that economies of scale is a static concept.

Let's turn to the "learning curve" concept: it uses the word "learning", presumably not by accident: but "learning" has to do with efficiency and not with scale. And efficiency has to do with technology, which is the one aspect left aside when discussing economies of scale.

As a final note, I won't dispute the meaning for the "learning curve" that you report, but I have to say that it sounds strange to me: whenever I have encountered the concept, it was always in a dynamic setting, as a synonym of "learning by doing": as we spend more time with a production process, we become more efficient at implementing it (and even if scale of operations remains the same).

I understand that a falling average cost can of course come as a result of the above process, but the dynamic aspect is crucial, contrasted to a static one.

In fact, in my experience, in a static sense a greater scale of operations always eventually leads to increasing average cost, if we do not allow for time to pass, and so experience and efficiency to be gained, that can more than offset the inefficiencies that accumulate due to the complexity of operations at a larger scale.

The above do not refer to the "easy phase" of decreasing average cost at low initial levels of production due to the inescapable existence of fixed costs.

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    $\begingroup$ +1 Although implicit in your answer, it is I suggest worth emphasizing that economies of scale is a concept of comparative statics, that is, we compare situations with less and with more inputs, without any implication that the latter has come about via a process of change from the former. $\endgroup$ Commented Jan 14, 2016 at 10:59
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    $\begingroup$ @AdamBailey Thanks. Well I do write "economies of scale is a static concept", but certainly it never hurts to stress crucial points with more specific and clear language, as you do. $\endgroup$ Commented Jan 14, 2016 at 11:05

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