How many wristwatches are cheaper than Big Ben?
Big machines are sometimes more efficient. But they cost more, so fewer can be produced with a finite budget. Small machines are cheaper and may benefit from improvement over time, driven by experience in building more units. When does this experience lead to greater overall efficiency? We derive an approximation which, given a learning rate, tells how much smaller a machine must be to overcome an initial efficiency disadvantage.
Learning curves were characterized in the context of industrial production in the 1930s by Wright.[^1] The production cost of a machine follows a power law in the number of units made so far