The Theory of Economic Growth

by W. Arthur Lewis

a landmark in the contemporary approach to economics" The Observer
"it is as good a book as its most obvious predecessors in the Smith's Wealth of Nations and Marshall's Industry and the Trade" Times Educational Supplement
Setting out the problems to be solved if mankind is to be freed from poverty, Theory of Economic Growth embraces the disciplines of economics, history, sociology, politics and anthropology in its coverage. Focussing on output and growth (rather than distribution and consumption) the book discusses economic institutions, knowledge, capital, population, resources and government, and their role in the growth of output per head of population.

Genres: Economics

456 pages, Paperback

First published December 1, 1955

About the author

Sir William Arthur Lewis was a Saint Lucian economist and the James Madison Professor of Political Economy at Princeton University. Lewis was known for his contributions in the field of economic development. In 1979, he was awarded the Nobel Memorial Prize in Economic Sciences.

Reviews

[Barack Liu · Rating 4 out of 5]

369-The Theory of Economic Growth-William Lewis-Economics-1955

Barack
2021/10/18

" The Theory of Economic Growth ", the first edition in 1955. It explores the problems that humans need to solve to get rid of poverty, and covers subjects such as economics, history, sociology, political science, and anthropology.

William Lewis was born in Castries, Saint Lucia, British Windward Islands in 1915 and died in 1991. Studied at London School of Economics. He was awarded the Nobel Memorial Prize in Economic Sciences in 1979. He is well-known for his contribution to the development of the economy.

He proposed the Lewis turning point. It refers to the situation in which surplus rural labor is fully absorbed into the manufacturing industry during economic development. This usually leads to increases in real wages in agriculture and unskilled industries. After an economy reaches the Lewis point, the economy needs a more balanced economic growth policy.

Table of Contents
1. Introduction
2. The will to economize
3. Economic institutions
4. Knowledge
5. Capital
6. Population and resources
7. Government


"First it should be noted that our subject matter is growth and not distribution. It is possible that output may be growing, and yet that the mass of the people may be becoming poorer. We shall have to consider the relationship between the growth and the distribution of output, but our primary interest is in analyzing not distribution but growth."

It is important to make big cakes, and to distribute the cakes well is also a must. Teamwork, the most important thing, is nothing more than these two things. "Don't worry about being scarce, but worry about unevenness." In the era of rapid information flow, the social conflicts caused by the gap between the rich and the poor will become more acute.

" The growth of output per head depends on the one hand on the natural resources available, and on the other hand on human behavior."

Human labor is obviously not homogeneous. The more labor forms with distinctive personal characteristics, the more obvious the income gap. But the question is, who should define this gap? It is obvious that there is a problem either entirely by the government or entirely by the market.

" First there is the effort to economize, either by reducing the cost of any given product or by increasing the yield from any given input of effort or of other resources. This effort to economize shows itself in various ways; in experimentation, or risk-taking; in mobility, occupational or geographical; and in specialization, to mention only its chief manifestations. If the effort is not made, either because they desire to economize does not exist, or else because either custom or institutions discourage its expression, then economic growth will not occur. Secondly, there is the increase of knowledge and its application. This process has occurred throughout human history, but the more rapid growth of output in recent centuries is associated obviously with the more rapid accumulation and application of knowledge in production. And thirdly, growth depends upon increasing the amount of capital or other resources per head. ”

The inner desire for growth, the improvement of population quality, and the abundance of resources, we can consider these aspects when we examine the growth of a country. We even see that some countries can overcome the lack of population quality and their own resources to achieve economic growth. This amazing driving force probably stems from their desire for growth.

“ Economists have studied specialization and capital. They have also stressed the mobility of mobility, of the invention and of risk-taking, and importance with care and elegance the logical implications of the will to economize.”

Economists study the social division of labor, capital, liquidity, and other issues, and use these indicators to consider economic development and health. The first step in evaluation is to find the evaluation indicators. The reason why we emphasize the importance of reading books and newspapers is to make ourselves familiar with these important economic indicators.

“ Some of the most elegant work of economic theorists in recent years has been concern~d with the stability of economic growth. Starting by assuming capitalist institutions and habits, economists have built mathematical models which oscillate, or rise logistically towards a limit, or ultimately swing round from growth to secular decline. These results are achieved by assuming various coefficients, and various relations between parameters-for such matters as the propensity to save, or the birth rate, or the determinants of investment decisions."

One of the meanings of the model is to predict the future. Only when the future is predicted can it be used for guidance and reference for the present. One of the jobs of economists is to establish quantitative models based on qualitative analysis, and finally realize the guidance of the real economy and society.

" The most difficult problem inconsistency is to explain why people hold the beliefs they do. Economic growth depends on attitudes to work, to wealth, to thrift, to having children, to the invention, to strangers, to adventure, and so on, and all these attitudes flow from deep springs in the human mind."

Macroeconomics involves too many people. It is a matter that requires multiple considerations. It is applicable in one environment, but may not work in another environment. The study of this issue may require a longer-span historical study of the main citizens of the country.

" Every economist goes through a phase where he is dissatisfied with the deductive basis of economic theory and feels sure that a much better insight into economic processes could be obtained by studying the facts of history. The instinct is sound, yet the enthusiasms of this phase seldom survive any serious attempt to get to grips with the facts of history. This is because there are very few facts of history in the relevant senses. We mean by this, in the first instance, that it is only for very few countries and for very recent periods that any adequate quantity of historical records exists; and even when there are plenty of records we cannot always be certain exactly what happened."

The research idea is clear, and we need to deduct and summarize it based on relatively objective historical records. Moreover, social science data may be more difficult to obtain than natural science data.

“ Yet it is obvious that when the social theorist appeals to facts, in the sense of appealing to history, he is appealing to facts in quite a different sense from that in which the chemist or the biologist appeals to facts. ”

In order for research to be valid, the social sciences also need adequate research, but due to recorded personal preferences, it may not be as decisively fair as natural science research. Even if we look at the official history to understand the history, what we understand is the processed history.

"By economic activity, we mean directed towards increasing the yield of a given effort or resource, or towards reducing the cost of a given yield. To say that economic activity is necessary to economic growth is to say no more than that men are not likely to get more unless they try to get more. Growth is the result of human effort. Nature is not particularly kind to man; left to herself she wins overwhelm with weeds. with floods. with epidemics and with other disasters which man wards off by taking thought and action. It is by accepting the varied challenges presented by his environment that man is able, in innumerable ways, to wrest from nature more product for less effort."

Human actions are one of the most important factors affecting the economy. In order to meet their own survival and development needs, humans consciously process nature. The process of economic development is the process by which mankind understands and transforms nature.

[Richard Marney · Rating 5 out of 5]

A reread (actually 3rd) of this timeless classic, with the focus this time on the role of institutions in economic development.

The literature of growth theory has exhaustively evaluated this and related questions ( how do they, which ones, what drives change, reinforcement, acceleration, reversals, and on and on…. ).

My perspective is that, whilst clearly as Professor Lewis argues, economic change does not result exclusively from institutional development, the institutions of a country and the evolution to a stronger framework represent the single most powerful determinant of long-term sustainable economic development. Natural resources can fuel growth spurts as long as reserves last, but weak rule of law, control of corruption, economic planning, property rights, contract enforcement, etc., will leave the country little changed or worse.