One of the most important and influential economists of the twentieth century, the trail of the eternally eclectic John Hicks is found all over economic theory. Although trained at Oxford, his ‘real’ education began when he was appointed to the London School of Economics in the late 1920s, where 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 Walrasian, 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 the spearhead of that movement. The precepts of that book had already been announced elsewhere. On the microeconomic side, his 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 Roy 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 Leon Walras (1934) was an attempt at a resurrection of the then-forgotten Lausanne School. His review of Gunnar 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 Friedrich 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, John Hicks maintained that the source of macrofluctuations must be found in “real” phenomena.
This faith was tested upon the appearance of John Maynard Keynes’s General Theory. His 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.
In 1939, Hicks weaved these 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 Economic’ 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 Alfred 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.
In the 1950s, 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, turning this time to growth and cycle theory. Roy Harrod 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 Paul Samuelson and Robert 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 Erik 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 John 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.
Major Works of John Hicks
– Edgeworth, Marshall and the Indeterminateness of Wages, 1930, EJ
– Theory of Uncertainty and Profit, 1931, Economica
– The Theory of Wages, 1932
– Marginal Productivity and the Principle of Variation, 1932, Economica
– Equilibrium and the Cycle, 1933, ZfN
– A Reconsideration of the Theory of Value, with R.G.D. Allen, Economica
– Leon Walras, 1934, Econometrica
– A Note on the Elasticity of Supply, 1934, RES
– Review of Myrdal, 1934, Economica
– Review of Dupuit, 1935, Economica
– The Theory of Monopoly, 1935, Econometrica
– Wages and Interest: A dynamic problem, 1935, EJ
– A Suggestion for Simplifying the Theory of Money, 1935, Economica
– Mr Keynes’s Theory of Employment, 1936, EJ
– Distribution and Economic Progress: a revised version, 1936, RES
– Mr Keynes and the Classics: A suggested simplification, 1937, Econometrica
– The Foundations of Welfare Economics, 1939, EJ
– Value and Capital: An inquiry into some fundamental principles of economic theory, 1939
– Mr Hawtrey on Bank Rate and the Long Term Rate of Interest, 1939, Manchester School
– Public Finance in National Income, with Ursula K. Hicks, 1939, RES
– The Valuation of Social Income, 1940, Economica
– Taxation and War Wealth, with U.K.Hicks and L. Rostas, 1941
– The Rehabilitation of Consumers’ Surplus, 1941, RES
– Saving and the Rate of Interest in War-Time, 1941, Manchester School
– Education in Economics, 1941, Bulletin MSS
– Consumers’ Surplus and Index-Numbers, 1942, RES
– The Monetary Theory of D.H.Robertson, 1942, Economica
– The Social Framework: An introduction to economics, 1942
– Maintaining Capital Intact, 1942, Economica
– The Beveridge Plan and Local Government Finance, with U.K. Hicks, 1943, Bulletin MSS
– The Four Consumer’s Surpus, 1944, RES
-Recent Contributions to General Equilibrum Economics, 1945, Economica
– Theorie de Keynes après neuf ans, 1945, Revue d’Economie Politique
– The Generalised Theory of Consumer’s Surplus, 1946, RES
– World Recovery After War, 1947, EJ
– Full Employment in a Period of Reconstruction, 1947, Nationalokonomisk Tidsskrift
– The Empty Economy, 1947, Lloyds BR
– The Problem of Budgetary Reform, 1949
– Devaluation and World Trade, 1949, Three Banks Review
– Mr Harrod’s Dynamic Economics, 1949, Economica
– A Contribution to the Theory of the Trade Cycle, 1950
– Free Trade and Modern Economics, 1951, Bulletin MSS
– Review of Menger, 1951, EJ
– The Long-Term Dollar Problem, 1953, Oxford EP
– The Process of Imperfect Competition, 1954, Oxford EP
– A Revision of Demand Theory, 1956
– Methods of Dynamic Analysis, 1956, in 25 Economic Essays in Honor of Erik Lindahl
– A Rehabilitation of ‘Classical’ Economics? Review of Patinkin, 1957, EJ
– The Measurement of Real Income, 1958, Oxford EP
– A Value-and-Capital Growth Model, 1958, RES
– Future of the Rate of Interest, 1958, Bulletin MSS
– World Inflation, 1958, Irish Bank Review
– Essays in World Economics, 1959
– Thoughts on the Theory of Capital: The Corfu Conference, 1960, Oxford EP
– Linear Theory, 1960, EJ
– Measurement of Capital in Relation to the Measurement of Other Economic Aggregates, 1961, in Lutz and Hague, editors, Theory of Capital
– Pareto Revealed, 1961, Economica
– Prices and the Turnpike: Story of a Mare’s Nest, 1961, RES
– Liquidity, 1962, EJ
– Capital and Growth, 1965
– Growth and Anti-Growth, 1966, Oxford EP
– Critical Essays in Monetary Theory, 1967
– Measurement of Capital – in Practice, 1969, Bulletin of ISI
– Autonomists, Hawtreyans and Keynesians, 1969, JMCB
– A Theory of Economic History, 1969
– Direct and Indirect Additivity, 1969, Econometrica
– A Neo-Austrian Growth Theory, 1970, EJ
– Elasticity of Substitution Again: Substitutes and complements, 1970, Oxford EP
– Review of Friedman, 1970, EJ
– The Austrian Theory of Capital and its Rebirth in Modern Economics, 1973, ZfN
– Ricardo’s Theory of Distribution, 1972, in Preston and Corry, editors, Essays in Honor of Lord Robbins
– Capital and Time: A Neo-Austrian theory, 1973
– Editor, Carl Menger and the Austrian School of Economics, with W. Weber, 1973
– Recollections and Documents, 1973, Economica
– The Mainspring of Economic Growth, 1973, Swedish JE. (repr. 1981, AER)
– On the Measurement of Capital, 1973, Economic Science
– The Crisis in Keynesian Economics, 1974
– Real and Monetary Factors in Economic Fluctuations, 1974, Scottish JPE
– Industrialism, 1974, International Affairs
– Capital Controversies: Ancient and Modern, 1974, AER
– The Scope and Status of Welfare Economics, 1975, Oxford EP
– What is Wrong with Monetarism, 1975, Lloyds BR
– The Quest for Monetary Stability, 1975, South African JE
– Some Questions of Time in Economics, 1976, in Tang et al, editors, Evolution, Welfare and Time in Economics: Essays in honor of Nicholas Georgescu-Roegen
– Economic Perspectives, 1976
– Must Stimulating Demand Stimulate Inflation?, 1976, Econ Record
– ‘Revolutions’ in Economics, 1976, in Latsis, editor, Method and Appraisal in Economics
– The Little that is Right with Monetarism, 1976, Lloyds BR
– Economic Perspectives, 1977
– Mr.Ricardo and the Moderns”, with S. Hollander, 1977, QJE
– Causality in Economics, 1979
– The Formation of an Economist, 1979, BNLQR
– Is Interest the Price of a Factor of Production?, 1979, in Rizzo, editor, Time, Uncertainty and Disequilibrium
– IS-LM: An explanation, 1980, JPKE
– Wealth and Welfare: Vol I. of Collected Essays in Economic Theory, 1981
– Money, Interest and Wages: Vol. II of Collected Essays in Economic Theory, 1982
– Classics and Moderns: Vol. III of Collected Essays in Economic Theory, 1983
– The New Causality: An explanation, 1984, Oxford EP
– Is Economics a Science?, 1984, Interdisciplinary Science Review
– Francis Ysidro Edgeworth, 1984, in Murphy, editor, Economists and the Irish Economy
– Methods of Dynamic Economics, 1985
– Sraffa and Ricardo: A critical view, 1985, in Caravale, Legacy of Ricardo
– Loanable Funds and Liquidity Preference, 1986, Greek ER
– Rational Behavior: Observation or assumption?, 1986, in Kirzner, editor, Subjectivism, Intelligibility and Economic Understanding
– Towards a More General Theory, 1988, in Kohn and Tsiang, editor, Finance Constraints, Expectations and Macroeconomics
– The Assumption of Constant Returns to Scale, 1989, Cambridge JE
– A Market Theory of Money, 1989
– An Accountant Among Economists: Conversations with John Hicks, with A. Klamer, 1989, JEP
– Ricardo and Sraffa, 1990, in Bharadwaj and Schefold, eds., Essays on Piero Sraffa
– The Unification of Macro-Economics, 1990, EJ
– A Self-Survey, 1990, Greek ER
– The Swedish Influence on Value and Capital, 1991, in Jonung, editor, The Stockholm School of Economics Revisited