Sir William Arthur Lewis (January 23, 1915 - June 15, 1991) was a British economist well known for his contributions in the field of economic development. In 1979 he won the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, also known as the Nobel Prize in Economics, becoming the first black person to win a Nobel Prize in a category other than peace. As of 2004, he is still the only black person to win a Nobel Prize in a non-humanities category.
Lewis was born in Saint Lucia, then still a British territory in the Caribbean. After gaining his BSc. in 1937 and Ph.D. in 1940 at the London School of Economics, Lewis lectured at the University of Manchester before being appointed Vice Chancellor of the University of the West Indies in 1959. In 1963 he was both knighted and appointed a lecturer at Princeton University (a position in which he would remain until his retirement in 1983) and in 1970 became director of the Caribbean Development Bank. He died on June 15, 1991 in Bridgetown, Barbados and was buried in the grounds of a community college named in his honour.
His contributions
Lewis's Nobel prize-winning work consists of 2 models that describe and explain the problems facing developing nations.
Lewis's two-tier model
This model at its simplest describes an economy with 2 sectors - agricultural (with low wages and a nearly infinite supply of labour) and industrial (where the bulk of the capital resides). The agricultural sector's labour migrates to the industrial sector, attracted by the initially higher wages. Competition forces the wages of workers in the industrial sector down to the levels of those in the agricultural sector. This leads to high profits in the industrial sector, which finances its further expansion.
This model thus provides an explanation as to why so often in developing nations, wages remain low and capital rents high, even as development continues apace.
Lewis's terms of trade model
Lewis then modelled the way the terms of trade between developed and developing nations are determined. He showed that in trade between 2 groups of countries (rich and poor) who produce 2 products each (food in both, coffee in the poor countries and steel in the rich) and trade the products that are not produced in common, the terms of trade are determined by the relative labour productivities in the agricultural sector. Specifically, the low productivity of labour in the poor countries' agricultural sector compared to the rich countries' agricultural sector will determine the terms of trade between them.
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