One of the most important and influential economists of the twentieth century, the trail of the eternally eclectic John Richard Hicks is found all over economic theory. Although trained at Balliol College, Oxford, his "real" education began in the late 1920s, after he appointed to the London School of Economics (LSE) in 1926. Under the encouragement of Lionel Robbins and others, he used his magnificent proficiency in many European tongues to absorb the economics treatises of Continental Europe. Thus seeped in the Lausanne, Austrian, and Swedish tradition, John Hicks began to break the Marshallian hold on Anglo-Saxon economics in the 1930s -- what we have called the great Paretian tide that consolidated the Marginalist Revolution begun over fifty years beforehand.
John Hicks's classic Value and Capital (1939) was a battering ram of that movement. The precepts of that book had already been announced elsewhere. On the microeconomic side, Hicks's 1930 article and 1932 book, Theory of Wages was an attempt at a careful and complete restatement of the marginal productivity theory (it was there that he introduced his famous "elasticity of substitution"). In his famous 1934 paper with R.G.D.Allen, Hicks introduced the Slutsky decomposition of demand into substitution and income effects, defined substitution and complementarity clearly and reacquainted English-speaking economists with the derivation of demand curves with the use of indifference curves and budget constraints and the equation between marginal rates of substition and relative prices.
His review article on "Monopoly" (1935) introduced the concept of "conjectural variations" as a way of uniting various theories of imperfect competition, but it was really his first and last stab at this subject. His paper on "Léon Walras" (1934) was an attempt at a resurrection of the then-forgotten Lausanne School. His review of Myrdal's work (1934) was a similar attempt to draw attention to the Stockholm School.
On the macroeconomics side, his 1931 article on Knightian theory and his 1933 article on the business cycle under the influence of Hayek were his first macroeconomic ventures - both exhibiting the L.S.E. stamp. His 1935 "Suggestion for Simplifying the Theory of Money" was a bold call for the integration of money and value theory - away from the simplistic Quantity Theory and towards a more choice- theoretic version along Walrasian lines. It was parallel to Keynes's "liquidity preference" and indeed, later portfolio theory. It is notable that his work on money was independent of his work on the business cycle: throughout his life, despite his magnificent contributions to monetary theory, Hicks maintained that the source of macrofluctuations must be found in "real" phenomena.
This faith was tested upon the appearance of J.M. Keynes's General Theory. Hicks's 1936 review was remarkably good, but it was his 1937 paper, "Mr. Keynes and the Classics", where Hicks introduced the IS-LM model (and that diagram) that provided the launching pad for the Neo-Keynesian synthesis. It was in that same 1937 paper that the concept of a "liquidity trap" was introduced.
Hicks happened to be Cambridge at this time - newly-married to fellow economist Ursula Webb, Hicks had left the LSE in 1935, and become a fellow at at Gonville & Caius College, Cambridge, But he soon moved on, leaving Cambridge in 1938 to take the Jevons Chair in political economy at the University of Manchester.
It was Manchester that Hicks put the final touches to his magnum opus. Hicks wove his different strands of thought into Value and Capital (1939). Much of modern microeconomics and general equilibrium theory has its roots in this book. The concept of "composite commodity" and the conditions for stability of general equilibrium were laid out there, as well as a more complete reworking of the theory of utility-based demand. His 1935 "Suggestion" and his work on Keynes (1936, 1937) found their way into the macroeconomic section - particularly in the discussion on liquidity preference and loanable funds theories of interest. He also developed the concept of "temporary equilibrium" (defined by a sequence of Hicksian "weeks" with expectations dividing them) that had been employed by the Stockholm School. He attempted a formulation of capital along Swedish-Austrian lines, but with less success.
A 1939 article announced Hicks's move into the "New Welfare Economics" in earnest . In it, he introduced what has now become known as the "Hicks Compensation Criteria" of ordering allocations. In a series of other articles (1940, 1941, 1942, 1944, 1946, 1958), which come together in his Revision of Demand Theory (1956), Hicks resurrected Marshall's concept of consumer's surplus and introduced and expanded upon the idea of "compensating variations" and "equivalent variations" as measures of welfare change.
Hicks left Manchester in 1946 and returned to Oxford, initially as a fellow of the graduate-oriented Nuffield College, but from 1952 as Drummond Professor of Political Economy (succeeding H.D. Henderson) and the associated fellow of All Souls (Hicks took early retirement in 1965, in exchange for a research fellowship at All Souls, yielding the Drummond Chair to R.C.O. Matthews). Hicks was knighted in 1964.
Although having produced a popular textbook (Social Framwork, 1942) and been engaged in all sorts of policy-oriented endeavours, Hicks continued his advance in macroeconomics through the 1950s, turning this time to growth and cycle theory. Roy Harrod's work (which he reviewed in 1949) caught his attention and led him to give unto the world his Contribution to the Theory of the Trade Cycle (1950), which developed a Harrodian multiplier- accelerator mechanism with ceilings and floors, thereby constraining Harrod's instability problem and yielding cyclical behavior. Still intrigued, he continued to concentrate on issue of equilibrium and disequilibrium growth paths. His encounter with the von Neumann growth model and the related work by Samuelson and Solow, yielded his remarkably clear 1960 article exposition of "Linear Theory" and, most importantly, his 1961 article on the von Neumann turnpike.
In an attempt to clarify his thinking on growth and capital, which was then coming under fire in the Cambridge Capital Controversy, (for Hicks's thoughts on the subject, see 1960, 1961), John Hicks gave us his Capital and Growth in 1965. In this second magnum opus, Hicks hammered together his previous work on Keynesian, Harrodian, von Neumann and capital theory, with a good sprinkling of Lindahl, into an attempt at a comprehensive re-examination of growth theory. His taxonomy - dividing models into fix-price and flex-price models - led him to further concerns, particularly the issue of the "traverse" (the movement from one growth equilibrium to another). The first part of Capital and Growth was reworked and republished as Methods of Economic Dynamics in 1985.
Hicks's concern with capital and growth throughout this time had left money out of the picture (his 1962 article being an exception). He addressed this in 1967 with his Critical Essays on Monetary Theory. There Hicks attempted a similar clarificiation and reworking of different theories of money. Sensing that these theories were not all quite right, he decided to fish for a better concept of money in economic history, giving us his remarkable Theory of Economic History (1969) and his posthumous Market Theory of Money (1989), which stressed the then-novel concept of a credit theory of exchange.
Nonetheless, capital and growth were still Hicks's primary concern. After a 1970 foray, Hicks turned to Austrian economics and single-handedly attempted a resurrection of Austrian capital theory in his 1973 book, Capital and Time. It was an attempt at formalizing an Austrian theory of capital which included both fixed and circulating capital.
He then changed tack again and turned to exploring some important methodological issues which had been gathering during his work on growth and capital. The first was time - and notably, the concept of irreversibility of time and causality in time. This was the body of his 1976 contribution to the Georgescu-Roegen festschrift and also his 1979 book, Causality in Economics. Here, in his 1974 Crisis in Keynesian Economics, in his 1980 paper "IS-LM: An explanation" and elsewhere (1981-3, 1984, 1988), Hicks denounced the pretence, method and theory of the very Neoclassical-Keynesian Synthesis he had helped create and pointed the way to new developments along more Post Keynesian lines. These and other works on methodology and the history of economics dominated the rest of his life.
How is one to assess an economist whose legacy runs as wide and deep as that of John Hicks? The quintessential "economist's economist", Hicks cannot be said to have founded a "school" - unless one were to count the generation of eclectic and critical Neo-Walrasian theorists inspired by his visionary but careful work, such as Morishima, Hahn and Negishi. But Hicks was for the most part a lone thinker, part of every school and thus part of no school. If any, his school was "economics".
Hicks himself claimed to have created no new economics but simply to have spent his life understanding, formulating and channeling the ideas of the Continental and Keynesian schools and his own historical, philosophical and practical reflections. In a sense, he may have been right - but he analyzed and extended them in a meaningful and challenging way and thus transformed economics in the process.
In many ways, Hicks's scholarly output is a perfect demonstration of how economics should be done: without partisanship for pet theories, without ideological quibbling, his own strictest critic, learning from all and everywhere, constantly searching for new ideas and staying glued to none. Hicks's approach to economics was informed by all the best qualities of the scientist, poet, philosopher and practical man, and he let none of these tendencies overreach themselves and overwhelm any other. In this sense, no economist before or since Hicks, has achieved such "Olympian" scholarship.
John Hicks was a professor at Oxford for most of his life and shared the Nobel prize in 1972 with another rare and valuable specimen, Kenneth J.Arrow. The Nobel Committee could not have chosen a better pair.
Major Works of John Hicks
Resources on John Hicks
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