Terms of Trade: Canary in the coal mine — AI and its Galgotias discards

When this author started studying economics in university in the early 2000s, the Lewis Model was still among the cornerstones of the course of development economics. Simply put, the Lewis Model envisages economic growth by a movement of workers from a traditional low productivity sector (such as agriculture) to modern high productivity sector such as industry. It is built on the premise that the agrarian sector will not lose marginal output as less productive workers migrate to industry, while the latter can always expand output with more workers and reinvested profits from existing businesses. Eventually, the economy will land in an equilibrium where wages in the two sectors have equalised and output in the latter has increased significantly without diminishing production in the former. Everybody ends up as a winner here.