A. Lewis (1954) identified two sectors in an economy: the capitalist sector—‘that part of the economy which uses reproducible capital and pays capitalists for the use thereof’—and the subsistence sector—‘all that part of the economy which is not using reproducible capital’. Per capita output is lower in the subsistence sector than in the capitalist sector, through a lack of capital. With additional capital, more workers can move from the subsistence sector to the capitalist sector. The process of economic development then depends on the transfer of surplus labour from the subsistence to the capitalist sector. The nature of risk in a peasant-dominated subsistence sector tends to hinder the creation of employment and the mobilization of surplus labour in the capitalist sector. ‘For this reason the path of industrialization is not smooth and trouble-free, or susceptible to analysis using the tools of equilibrium economics’ (Ghosh (2007) J. Econ. Methodol. 14, 1).