Experience curves and industrial policy

Experience curves purport to show that average real price or costs of a product decrease with its cumulative output and are used to justify increases in industrial concentration on efficiency grounds. But the published evidence for their existence is not always convincing. Even if they do exist, they are merely mongrel relationships reflecting many economic forces including technical progress and economies of scale in addition to ‘learning’ or ‘experience’. They should not be generalised to all products or be used to underpin industrial policy.