Learning by doing

Viewing economic policies through the lens of learning provides a different perspective on many issues. The great economist Kenneth Arrow emphasised the importance of learning by doing. The only way to learn what is required for industrial growth, for example, is to have industry. And that may require either ensuring that one’s exchange rate is competitive or that certain industries have privileged access to credit — as a number of East Asian countries did as part of their remarkably successful development strategies.

There is a compelling infant economy argument for industrial protection. Moreover, financial-market liberalisation may undermine countries’ ability to learn another set of skills that are essential for development: how to allocate resources and manage risk.

Likewise, intellectual property, if not designed properly, can be a two-edged sword when viewed from a learning perspective.… More broadly, many of the policies — especially those associated with the neoliberal "Washington Consensus" — foisted on developing countries with the noble objective of promoting the efficiency of resource allocation actually impede learning and, thus, lead to lower standards of living in the long run.

From "Creating a Learning Society"