Kelvin Lancaster

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Kelvin Lancaster
Born (1924-12-10)December 10, 1924
Sydney, Australia
Died July 23, 1999(1999-07-23) (aged 74)
New York, New York
Nationality Australian
Fields Economics
Institutions Columbia University
Alma mater University of London (PhD 1958)
University of London External Programme (BSc 1953)
University of Sydney (BA 1948) Sydney Boys High School
Known for Theory of the second best
Lancasterian demand theory

Kelvin John Lancaster (December 10, 1924 – July 23, 1999) was a mathematical economist and John Bates Clark professor of economics at Columbia University. He is best known for the development of the Theory of the Second Best with Richard Lipsey.[1] Lancaster was also active in developing the calculus of qualitative economics,[2][3] formulating the household production function, and applying the hedonic model to the estimation of the price of houses.

In a 1966 paper, Lancaster developed what he called a "new theory of consumer demand", in which the then standard microeconomic demand theory was modified by stipulating that what consumers are seeking to acquire is not goods themselves (e.g. cars or train journeys) but the characteristics they contain (e.g. transport from A to B, display of fashion sense).[4] This theory provides a convenient account of the difference between less developed (Lancaster called them "primitive") consumption economies, in which there are fewer goods than characteristics, and more developed ("sophisticated") consumption economies, in which there are more goods than characteristics, so that consumers can secure any combination of characteristics they desire, subject only to budget constraints. It also provides a way of predicting demand for new commodities, so long as they do not embody any new characteristics.[5]

According to the economist Jagdish Bhagwati, "He [Kelvin Lancaster] was widely regarded as a potential recipient of the Nobel Prize, for the notable impact that had been made by his contributions to the theory of second best and the integration of variety into economic theory. He joins the list of extraordinary economists such as Joan Robinson, Roy Harrod and Mancur Olson whom death deprived of this singular honor."

He attended Sydney Boys High School, graduating in 1940.[6]


  1. ^ Lipsey, R. G.; Lancaster, Kelvin (1956). "The General Theory of Second Best". Review of Economic Studies 24 (1): 11–32. doi:10.2307/2296233. JSTOR 2296233.  edit
  2. ^ Lancaster, Kelvin (1962). "The Scope of Qualitative Economics". Review of Economic Studies 29 (2): 99–123. doi:10.2307/2295817. JSTOR 2295817.  edit
  3. ^ Kelvin J. Lancaster, 1968. Mathematical Economics, Macmillan.
  4. ^ Lancaster, Kelvin J. (1966). "A New Approach to Consumer Theory". Journal of Political Economy 74 (2): 132–157. doi:10.1086/259131. JSTOR 1828835.  edit
  5. ^ Ronald Findlay, 2008. "Lancaster, Kelvin John" (1924–1999)," The New Palgrave Dictionary of Economics, 2nd Ed. Abstract.
  6. ^

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