While it is possible that the saints are the light referred to here, (thus making them the "Light of the world"), it may also be that James is referencing Plato's Allegory of the Cave. In this allegory, Plato makes extensive use of light in illustrating his Theory of Forms to Glaucon.
This theory eventually gave rise to the concept of Creatio Ex Nihilo with both Creatio Ex Nihilo and Plato's Theory of Forms being addressed in the opening chapter of John 1:1.
It may also be that even Jesus himself was referencing Plato's light and was making the argument that it is the actions or decisions of saints (the "light/shadows" that we cast which give rise to the "form" of the world - whether it be good or evil (a Kingdom Theology or Inaugurated Eschatology). This would mean then that James is referring to both the idea that the saints are light and the idea of Plato's cave.
This would also explain the "begetting" referenced in verse 18 and would relate to John's depiction of Jesus as the "Logos" of the world in Chapter 1 and the light and "begetting" of Jesus in Chapter 3 of John:
16For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.
19And this is the condemnation, that light is come into the world, and men loved darkness rather than light, because their deeds were evil.
20 For every one that doeth evil hateth the light, neither cometh to the light, lest his deeds should be reproved.
21 But he that doeth truth cometh to the light, that his deeds may be made manifest, that they are wrought in God.
as well as the "light" of 1 Timothy 6:16 and 1 John 1:5
