John Richard Hicks

Sir John Richard Hicks (born April 8, 1904 – died May 20, 1989) was a British economist, one of the most influential economists of the twentieth century. He contributed to the field of economics with his IS/LM model, which summarized the Keynesian view of macroeconomics, and his statement of consumer demand theory in microeconomics. In 1972, Hicks was awarded the Nobel Prize in Economics for his contributions to general economic equilibrium theory and welfare theory.

Life

John Richard Hicks was born in Leamington Spa, Warwickshire, England, the son of a journalist. He was educated at Clifton College (1917-22) and later received a mathematical scholarship to study at Balliol College, at the University of Oxford. He enrolled at Oxford in 1923.

Although initially specializing in mathematics, Hicks was not contend with mathematics and had a strong interest for literature and history. He transferred in 1923 to the newly opened School of Philosophy, Politics and Economics. He however did not have adequate qualification in any of the subjects that he had studied, and had graduated with a second-class degree.

Economists, in 1920s, were very scarce, so Hicks picked up a temporary lectureship at the London School of Economics and managed to get continued. He started as a labor economist, doing descriptive work on industrial relations, but gradually moved over to the analytical side. He discovered that his mathematics, by that time almost forgotten, could be revived, and was sufficient to cope with what anyone used in economics.

In 1935, Hicks married his fellow economist, Ursula Webb, and transferred to the Cambridge University where he became lecturer in economics. During his three years in Cambridge, Hicks completed his Value and Capital, which was based on the work he had done in London. He was also a fellow of Gonville and Caius College, at Cambridge, from 1935 to 1938.

In 1938, Hicks became professor at the University of Manchester. It was there that he started to focus mainly on welfare economics, and its application to social accounting. In 1946 he returned to Oxford, first as a research fellow of Nuffield College (1946-52), then as Drummond Professor of Political Economy (1952-65), and finally as a research fellow of All Souls College (1965-71).

Hicks became a fellow of the British Academy in 1942; a foreign member of the Royal Swedish Academy in 1948, of the Accademia dei Lincei, Italy, in 1952, and of the American Academy in 1958. He was knighted in 1964. He received honorary doctor degree from several British Universities - Glasgow, Manchester, Leicester, East Anglia and Warwick - as well as of the Technical University of Lisbon, Portugal.

In 1972, Hicks received the Nobel Prize in Economics, together with Kenneth J. Arrow, for his work on general economic equilibrium theory and welfare theory.

John Hicks died on May 20, 1989 in Blockley, Gloucestershire, Great Britain.

Work

Microeconomics

Hick's early work was as a labor economist culminated in The Theory of Wages (1932), still considered standard in the field. In that book he gave his own interpretation of the marginal productivity theory, attempting to revoke interest in it once again. In the book, he also introduced his famous "elasticity of substitution" - “the elasticity of the ratio of two inputs to a production (or utility) function with respect to the ratio of their marginal products (or utilities)” (see Wikipedia).

In the mid-1930s, Hicks worked on the way to unite various theories of imperfect competition, introducing the concept of "conjectural variations". He also attempted to resurrect the Lausanne School of economics by introducing some important concepts from it to the English-speaking world. In 1934 he tried to do the same with the review of Gunnar Myrdal's work, which drew attention to the Stockholm School.

His magnum opus was Value and Capital, published in 1939. The book built upon ordinal utility and mainstreamed the now-standard distinction between the substitution effect and the income effect for an individual in demand theory for the 2-good case. It generalized analysis to the case of one good and a composite good, that is, all other goods. It aggregated individuals and businesses through demand and supply across the economy. It anticipated the aggregation problem, most acutely for the stock of capital goods.

The book also introduced general equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium. In the course of analysis Hicks formalized comparative statics. In the same year, he also developed the famous "compensation" criteria called Kaldor-Hicks efficiency for welfare comparisons of alternative public policies or economic states.

The book Value and Capital had tremendous impact. Much of modern microeconomics, as well as general equilibrium theory, have its roots in this book.

Macroeconomics

His most familiar contribution in macroeconomics was the Hicks-Hansen IS-LM model, which formalized the theory of John Maynard Keynes. The model describes the economy as a balance between three commodities: money, consumption and investment. The model eventually became the starting point of the Neo-Keynesian synthesis, in economical systems in the post-war period. The Neo-Keynesian system dominated economy in the mid-20th century, coming under criticism in early 1970s, when the high inflation and growing unemployment seemed to be incompatible with the predictions of the system. In one of his later works, published in 1980, Hicks criticized his own model, asserting it had omitted some crucial components of Keynes's arguments, especially those related to uncertainty.

Among his other contributions to macroeconomics is the concept of "liquidity trap" – which happens in stagnant economy, when the nominal interest rate is close or equal to zero, and when people start to keep their savings only in short-term bank accounts, expecting the recession. He also developed the concept of "temporary equilibrium", enlarged the "Linear Theory" and elaborated on the von Neumann turnpike.

In 1970s Hicks worked to resurrect the Austrian school, attempting to formalize the Austrian theory of capital which included both fixed and circulating capital.

Legacy

John Richard Hicks was one of the most important and influential economists of the twentieth century. He broke up with Marshallian tradition that dominated Anglo-Saxon world in the 1930s, in what is commonly known as “Paretian revival”, and reintroduced the theories of Walrasian, Austrian, and Swedish schools. His work, together with other great economist thinkers such as Paul Samuelson, Oskar Lange, Abba Lerner, Maurice Allais, and Harold Hotelling, helped consolidate the Marginalist revolution, which started some fifty years before.

Although his work was deep enough, and his influence strong enough to form a school of thought, Hicks never gathered any greater number of followers. The reason for this is probably that his approach was critical and eclectic, building upon every school that had something to offer. He however inspired generations of thinkers, especially in the tradition of Neo-Walrasianism, such as Michio Morishima, Frank H. Hahn, and Takashi Negishi.

Publications

• Hicks, John R. 1932. The Theory of Wages. London: Macmillan.
• Hicks, John R. 1939. The Foundations of Welfare Economics. Economic Journal, 69, 696-712.
• Hicks, John R. 1940. The Valuation of Social Income. Economica, 7, 105-24.
• Hicks, John R. 1941. The Rehabilitation of Consumers' Surplus. Review of Economic Studies, 8, 108-16.
• Hicks, John R. 1959. Essays in World Economics, Oxford: Clarendon.
• Hicks, John R. 1965. Capital and Growth. Oxford: Clarendon.
• Hicks, John R. 1971 (original published in 1942). The Social Framework: An Introduction to Economics. Oxford University Press. ISBN 0198281730
• Hicks, John R. 1975. The Scope and Status of Welfare Economics. Oxford Economics Papers, 27(3), 307-26.
• Hicks, John R. 1977. Economic Perspectives. Oxford University Press. ISBN 0198284071
• Hicks, John R. 1979 (original published in 1950). A Contribution to the Theory of the Trade Cycle. Oxford University Press. ISBN 0198284160
• Hicks, John R. 1980. IS-LM: An Explanation. Journal of Post Keynesian Economics, 3(2), 139-54
• Hicks, John R. 1981. Wealth and Welfare: Vol I. of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674137418
• Hicks, John R. 1982. Money, Interest and Wages: Vol. II of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674584252
• Hicks, John R. 1983. Classics and Moderns: Vol. III of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674137434.
• Hicks, John R. 1986 (original published in 1956). A Revision of Demand Theory, Oxford University Press. ISBN 0198285507
• Hicks, John R. 2001 (original published in 1969). A Theory of Economic History. Oxford University Press. ISBN 0198811632
• Hicks, John R. 2001 (original published in 1939). Value and Capital. Oxford University Press. ISBN 0198282699

References

ISBN links support NWE through referral fees

• Autobiography. NobelPrize.org, on <http://nobelprize.org>. Retrieved on June 16, 2007, <http://nobelprize.org/nobel_prizes/economics/laureates/1972/hicks-autobio.html>
• Bliss, Christopher. 1987. Hicks, John Richard. In Murray Milgate & Peter Newman John Eatwell (eds.) The New Palgrave: A Dictionary of Economics, vol. 2, pp. 641-46. Macmillan.
• Wood, John. Sir John Hicks: Critical Assessments (Second Series). Routledge. ISBN 0415367077

External links

• Autobiography – Hicks’s autobiography from 1992
• Hicks's Trade Cycle – On Hicks’s work
• Hicks’s work – On some of Hicks’s theories
• The Hicks-Hansen IS-LM Model – On the model
• John Richard Hicks - Biography
• John Richard Hicks – Biography on Encyclopedia Britannica
• The Mainspring of Economic Growth – Hicks’s Nobel Prize lecture from 1973
• The Neoclassical Theory of Distribution – On the context of Hisks’s work
• The Neo-Keynesian World – Neo-Keynesian theories
• Press Release of Nobel award (1972)

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