Is Lewis's infinite supply model of labor transfer a domestic theory?

From 65438 to 0954, Lewis published his famous book "Economic Development under Unlimited Labor Supply". Lewis believes that the national economy of developing countries consists of two different sectors, namely, the traditional economic sector and the modern economic sector. This is the so-called dual economic structure, or there is a dual economic structure in developing countries. As far as China is concerned, the so-called traditional economic sector is a small-scale peasant economic system that has existed for thousands of years, and the so-called modern economic sector is a modern industrial and commercial economic system that emerged after the Opium War. Lewis pointed out that there are a large number of surplus laborers with "zero marginal input benefit" in the traditional agricultural sector of developing countries. If developing countries want to develop, they must be absorbed by modern economic sectors and accumulate capital.

Lewis further pointed out that as long as there is unlimited surplus labor supply in traditional economic sectors, modern economic sectors can employ workers with the "minimum living wage", that is, the labor cost can only maintain a living standard, and the "minimum living wage" will be maintained together until the surplus labor is absorbed. That is to say, in the long stage of economic development before the traditional agricultural surplus labor force is absorbed, the "livelihood wage" mechanism will fundamentally restrict the wage level of the labor force transferred to the modern economic sector to be substantially improved. Even if it is improved, it will only make up for the higher living expenses in cities than in rural areas, such as 30%. In Lewis's view, as long as there is surplus labor in the traditional agricultural sector, that is, there is unlimited supply of labor, the market mechanism in which supply and demand determine labor prices will not work. The so-called "lewis turning point", in the strict Lewis context, refers to the time when the dual economic structure of the national economy develops to the point where the "livelihood wage" mechanism does not work. At this point, the surplus labor force in traditional economic sectors has been absorbed, and the mechanism of determining labor price by supply and demand has begun to play a role.

However, after careful deliberation, the concept of "livelihood wage" founded by Lewis is not established.

First of all, due to the transfer of some surplus labor, the total labor force in the traditional agricultural sector tends to decrease, but the total output of the traditional agricultural sector does not decrease, so the average output of the surplus labor force in the traditional economic sector will inevitably increase. In other words, the labor productivity of traditional economic sectors will increase with the transfer of surplus labor, so that the "livelihood" of workers in traditional economic sectors, that is, the income situation, will not be fixed at the level before the emergence of modern economic sectors. Moreover, the more surplus labor in the traditional agricultural sector is transferred out, that is, the less the total surplus labor in the traditional agricultural sector, the greater the improvement of the "livelihood" situation.

In the framework of Lewis's dual economic structure theory, if we want to establish the concept of "minimum living wage", we need to add a hypothesis that the number of new laborers in the traditional agricultural sector is equal to the number of transferred laborers. However, once this assumption is made, it is equivalent to assuming that the surplus labor force in traditional departments will never transfer. Obviously, Lewis and his theoretical followers dare not add this hypothesis.

Secondly, from the first moment when the modern economic sector absorbs labor from the traditional agricultural sector, it is bound to be accompanied by the commercial behavior of buying agricultural products from the traditional agricultural sector (note: it is assumed that the modern economic sector only engages in the secondary industry and the tertiary industry). In this way, the traditional economic sector has obtained the monetary payment ability to buy modern means of subsistence and modern agricultural means of production from the modern economic sector. Modern means of subsistence (such as clocks and watches) have directly improved the living conditions of traditional farmers; In particular, the use of modern agricultural means of production means that the innovation of agricultural production technology will inevitably lead to the improvement of agricultural labor productivity and land productivity, and increase the total output of traditional departments, thus further improving the average output of traditional agricultural departments on the basis of the above-mentioned simple reduction of total labor force.

Professor Zhang Wuchang also pointed out Lewis's mistake that the marginal productivity of agriculture is zero in his book On Tenants.

As long as the above two points cannot be denied, then the concept of "livelihood wage" cannot be established. If the concept of "minimum living wage" fails, the so-called "Lewis turning point" will certainly fail. The economic value of "lewis turning point" lies in expounding the critical point at which the market mechanism that determines the price of labor supply and demand plays its role. Obviously, Lewis is wrong to set this critical point in his model. The market mechanism in which supply and demand determine labor price will play a role from the moment when modern economic sectors take root in traditional society. Lewis claimed that the dual economic structure model was established "according to the tradition of classical school", but in the process of establishing the concept of "livelihood wage", he violated the most basic classical economic norm that supply and demand determine prices.