While studying at the London School of Economics, Arthur Lewis was a student of the renowned economist Friedrich Hayek.

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Sir Arthur Lewis (1915–1991) was a Nobel laureate in economics, knighted for his contributions to economic development. Born in Saint Lucia, he is renowned for his model explaining the structural transformation of an economy, which he detailed in his Nobel-winning essay, 'Economic Development With Unlimited Supplies of Labour.' Lewis was inspired by classical economists such as Adam Smith and Karl Marx, and he aimed to re-center contemporary economics on their core questions regarding how income growth and distribution are determined together over time. He initially wished to be an engineer but pursued economics instead, believing racial discrimination would be a barrier to employment in engineering.

Arthur Lewis

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

Arthur Lewis's model describes a dual-sector economy, comprising a modern 'capitalist' industrial sector and a traditional 'subsistence' agricultural sector. In this framework, the subsistence sector consists of family farms that produce only enough for their own survival. The capitalist sector is characterized by businesses that innovate with new technologies to lower production costs and increase profits. When these businesses are profitable, they expand, creating a demand for labor that is met by drawing workers from the subsistence sector. This labor shift is a key component of the structural transformation of the economy. The model is also applied within macroeconomics to explain why the 'hockey stick' pattern of sustained growth has not yet occurred in some countries.

Arthur Lewis's Model of Economic Development

Arthur Lewis's career path serves as an example of the impact of racial discrimination on employment opportunities. He originally wanted to become an engineer but shifted to economics because he concluded that racial prejudice would prevent him from finding work as a Black engineer with either government employers or private white-owned firms.

Racial Discrimination as an Employment Barrier in Arthur Lewis's Experience

An example of Arthur Lewis's early academic talent occurred when an illness forced him to stay home for several months. During this time, through self-study and lessons from his father, he advanced his knowledge so significantly that upon returning to school, he was promoted from the fourth grade directly to the sixth.

Arthur Lewis's Early Academic Aptitude

Arthur Lewis's Tutelage under Friedrich Hayek

Arthur Lewis aimed to redirect the focus of modern economics toward the fundamental questions previously posed by classical economists like Adam Smith and Karl Marx. He emphasized their approach of analyzing how economic growth and income distribution are determined simultaneously over time, seeking to make these interconnected issues central to development economics once again.

Lewis's Revival of Classical Economic Questions on Growth and Distribution

In 1954, Arthur Lewis published his foundational essay, 'Economic Development With Unlimited Supplies of Labour,' in Volume 22 of the journal *Manchester School*, spanning pages 139–191. This paper is the primary source for his renowned model of economic development.

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