Learning Curves: How Factories Get Better

How production costs fall as firms gain experience, first observed in aircraft factories, and why this matters for industries from solar panels to batteries.

As factories produce more of a product, they usually get better at making it. Costs fall, quality improves and production speeds up. This pattern is called the learning curve or learning by doing.

Wright’s discovery

In 1936, aeronautical engineer Theodore Wright studied aircraft production. He found that each time the cumulative number of aircraft produced doubled, the labour hours needed per plane fell by a roughly constant percentage, around 20 percent in his data. This relationship became known as Wright’s law.

Why costs fall

Workers gain skill through repetition.
Managers improve processes, layouts and scheduling.
Engineers redesign products to be easier to make.
Suppliers improve components.
Economies of scale as volumes rise.

Modern examples

Learning curves help explain dramatic cost declines:

Solar panels: the price of solar photovoltaic modules fell by around 90 percent or more over the 2010s alone, as cumulative production soared.
Lithium-ion batteries: battery pack prices fell by around 90 percent between 2010 and the early 2020s, according to BloombergNEF.
Semiconductors and many electronic products.

Implications

First movers can gain cost advantages that later entrants struggle to match.
Infant industry arguments: governments sometimes support new industries so they can move down the learning curve and become competitive.
Clean energy policy: supporting early deployment of technologies like solar and batteries helped drive down costs for everyone.

The hundredth plane

A factory building its first aircraft needs many hours of work, as workers learn each step. By the hundredth plane, workers know the process well, tools are better arranged and many problems have been solved. Each plane now takes far fewer hours. This is the learning curve in action.

Thinking costs fall automatically with time

Learning curves depend on cumulative production and deliberate improvement, not simply time passing. Products that are rarely made may not see the same cost declines.

Key takeaways

Learning curves describe falling costs as cumulative production rises.
Theodore Wright found in 1936 that aircraft labour hours fell about 20 percent per doubling of output.
Solar panels and batteries saw costs fall by around 90 percent partly through learning.
Learning curves support infant industry and clean energy deployment arguments.