For every cumulative doubling of units produced, costs fall by a constant percentage.
Wright's 1936 aircraft data showed about a 20% reduction in direct labour input for each doubling of cumulative output, an 80% progress ratio. Observed progress ratios vary widely across technologies and organisations, with 80 to 85% a common range rather than a constant. Swanson's solar law is a specific case.
In practice
- A manufacturer that has built four thousand units makes the next thousand with about a fifth less labour than the first thousand took.
- Swanson's solar law is a specific case, which is why cumulative volume rather than time is the variable that predicts cost.
- Subject
- Economics & Incentives
- Essay
- The regularities money obeys