John Hicks

John Hicks

Overview
Sir John Richard Hicks (8 April 1904 – 20 May 1989) was a British economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory
Consumer theory
Consumer choice is a theory of microeconomics that relates preferences for consumption goods and services to consumption expenditures and ultimately to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most closely studied relations in...

 in microeconomics
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

, and the IS/LM model
IS/LM model
The IS/LM model is a macroeconomic tool that demonstrates the relationship between interest rates and real output in the goods and services market and the money market...

 (1937), which summarised a Keynesian view of macroeconomics
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

. His book Value and Capital
Value and Capital
Value and Capital is a book by the British economist John Richard Hicks, published in 1939. It is considered a classic exposition of microeconomic theory...

(1939) significantly extended general-equilibrium and value theory.
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Encyclopedia
Sir John Richard Hicks (8 April 1904 – 20 May 1989) was a British economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory
Consumer theory
Consumer choice is a theory of microeconomics that relates preferences for consumption goods and services to consumption expenditures and ultimately to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most closely studied relations in...

 in microeconomics
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

, and the IS/LM model
IS/LM model
The IS/LM model is a macroeconomic tool that demonstrates the relationship between interest rates and real output in the goods and services market and the money market...

 (1937), which summarised a Keynesian view of macroeconomics
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

. His book Value and Capital
Value and Capital
Value and Capital is a book by the British economist John Richard Hicks, published in 1939. It is considered a classic exposition of microeconomic theory...

(1939) significantly extended general-equilibrium and value theory. The compensated demand function is named the Hicksian demand function in memory of him.

In 1972 he received the Nobel Memorial Prize in Economic Sciences (jointly) for his pioneering contribution to general equilibrium theory and welfare theory
Welfare economics
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it...

.

Early life


Hicks was born in 1904 at Warwick
Warwick
Warwick is the county town of Warwickshire, England. The town lies upon the River Avon, south of Coventry and just west of Leamington Spa and Whitnash with which it is conjoined. As of the 2001 United Kingdom census, it had a population of 23,350...

, England. His father was a journalist at a local newspaper.

He was educated at Clifton College
Clifton College
Clifton College is a co-educational independent school in Clifton, Bristol, England, founded in 1862. In its early years it was notable for emphasising science in the curriculum, and for being less concerned with social elitism, e.g. by admitting day-boys on equal terms and providing a dedicated...

 (1917–22) and at Balliol College, Oxford
Balliol College, Oxford
Balliol College , founded in 1263, is one of the constituent colleges of the University of Oxford in England but founded by a family with strong Scottish connections....

 (1922–26), financed by mathematical scholarships. During his school days, and in his first year at Oxford, he specialised in mathematics but also had interests in literature and history. In 1923, he moved to Philosophy, Politics and Economics, the "new school" just being started at Oxford, graduating with second-class honors
British undergraduate degree classification
The British undergraduate degree classification system is a grading scheme for undergraduate degrees in the United Kingdom...

 and, so he states, "no adequate qualification in any of the subjects" that he had studied.

Career, influences, and honors


Hicks secured a temporary lectureship at the London School of Economics and Political Science
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...

 in 1930. He started as a labour economist and did descriptive work on industrial relations but gradually he moved over to the analytical side, where his mathematics background returned to the fore. Influence included Lionel Robbins
Lionel Robbins
Lionel Charles Robbins, Baron Robbins, FBA was a British economist and head of the economics department at the London School of Economics...

 and such associates as Friedrich von Hayek, R.G.D. Allen, Nicholas Kaldor
Nicholas Kaldor
Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

, and Abba Lerner - and Ursula Webb
Lady Ursula Hicks
Ursula Kathleen Webb Hicks was an Irish-born economist. She was daughter of William and Isabella Webb and wife of John Hicks.Despite her impressively heavyweight husband, Ursula Hicks was an accomplished scholar in her own right. She was a renowned public finance and development economist...

, who, in 1935, became his wife.

From 1935 to 1938, he lectured at Cambridge where he was also a fellow of Gonville & Caius College
Gonville and Caius College, Cambridge
Gonville and Caius College is a constituent college of the University of Cambridge in Cambridge, England. The college is often referred to simply as "Caius" , after its second founder, John Keys, who fashionably latinised the spelling of his name after studying in Italy.- Outline :Gonville and...

. He was mainly occupied in writing Value and Capital, which was based on the work he had done in London. From 1938 to 1946, he was Professor at the University of Manchester
University of Manchester
The University of Manchester is a public research university located in Manchester, United Kingdom. It is a "red brick" university and a member of the Russell Group of research-intensive British universities and the N8 Group...

. It was there that he did his main work on welfare economics, with its application to social accounting.

In 1946 he returned to Oxford, first as a research fellow of Nuffield College
Nuffield College, Oxford
Nuffield College is one of the constituent colleges of the University of Oxford in England. It is an all-graduate college and primarily a research establishment, specialising in the social sciences, particularly economics, politics and sociology. It is a research centre in the social sciences...

 (1946–52), then as Drummond Professor of Political Economy
Drummond Professor of Political Economy
The Drummond Professorship of Political Economy at All Souls College, Oxford has been held by a number of distinguished individuals, including three Nobel laureates. The professorship is named after and was founded by Henry Drummond...

 (1952–65), and finally as a research fellow of All Souls College (1965–71) where he continued writing after retirement. He was also an honorary fellow of Linacre College, Oxford
Linacre College, Oxford
Linacre College is one of the constituent colleges of the University of Oxford in the UK, currently offering graduate entry only. It is located on St Cross Road at the corner of St Cross Road and South Parks Road, next to the University Parks and opposite the Tinbergen Building, which is shared by...

 . He died in 1989.

Hicks was knighted in 1964 and was co-recipient of the Nobel Prize in Economic Sciences (with Kenneth J. Arrow) in 1972. He donated the Nobel Prize to the London School of Economics and Political Science
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...

's Library Appeal in 1973.

Contributions to economic analysis


Hicks's early work as a labor economist
Labour economics
Labor economics seeks to understand the functioning and dynamics of the market for labor. Labor markets function through the interaction of workers and employers...

 culminated in The Theory of Wages
The Theory of Wages
The Theory of Wages is a book by the British economist John R. Hicks published in 1932 . It has been described as a classic microeconomic statement of wage determination in competitive markets...

(1932, 2nd ed. 1963), still considered standard in the field. He collaborated with R.G.D. Allen in two seminal papers on value theory
Value theory
Value theory encompasses a range of approaches to understanding how, why and to what degree people should value things; whether the thing is a person, idea, object, or anything else. This investigation began in ancient philosophy, where it is called axiology or ethics. Early philosophical...

 published in 1934.

His magnum opus
Magnum opus
Magnum opus , from the Latin meaning "great work", refers to the largest, and perhaps the best, greatest, most popular, or most renowned achievement of a writer, artist, or composer.-Related terms:Sometimes the term magnum opus is used to refer to simply "a great work" rather than "the...

 is Value and Capital
Value and Capital
Value and Capital is a book by the British economist John Richard Hicks, published in 1939. It is considered a classic exposition of microeconomic theory...

published in 1939. The book built on ordinal utility
Ordinal utility
Ordinal utility theory states that while the utility of a particular good or service cannot be measured using a numerical scale bearing economic meaning in and of itself, pairs of alternative bundles of goods can be ordered such that one is considered by an individual to be worse than, equal to,...

  and mainstreamed the now-standard distinction between the substitution effect and the income effect
Income effect
In economics, the consumer's preferences, money income and prices play an important role in solving the consumer's optimization problem...

 for an individual in demand theory
Consumer theory
Consumer choice is a theory of microeconomics that relates preferences for consumption goods and services to consumption expenditures and ultimately to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most closely studied relations in...

 for the 2-good case. It generalised the analysis to the case of one good and a composite good
Composite good
In economics, demand for a good is often the focus as to a change in its price. A composite good is an abstraction used in economics that represents all goods in the relevant budget besides the one in question.-Purpose:...

, that is, all other goods. It aggregated individuals and businesses through demand and supply across the economy. It anticipated the aggregation problem
Aggregation problem
An aggregate in economics is a summary measure describing a market or economy. The aggregation problem refers to the difficulty of treating an empirical or theoretical aggregate as if it reacted like a less-aggregated measure, say, about behavior of an individual agent as described in general...

, most acutely for the stock of capital goods. It 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 formalised comparative statics
Comparative statics
In economics, comparative statics is the comparison of two different economic outcomes, before and after a change in some underlying exogenous parameter....

. In the same year, he also developed the famous "compensation" criterion called Kaldor-Hicks efficiency
Kaldor-Hicks efficiency
Kaldor–Hicks efficiency, named for Nicholas Kaldor and John Hicks, also known as Kaldor–Hicks criterion, is a measure of economic efficiency that captures some of the intuitive appeal of Pareto efficiency, but has less stringent criteria and is hence applicable to more circumstances...

 for welfare comparisons of alternative public policies or economic states.

Hicks's most familiar contribution in macroeconomics
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

 was the Hicks-Hansen IS-LM model
IS/LM model
The IS/LM model is a macroeconomic tool that demonstrates the relationship between interest rates and real output in the goods and services market and the money market...

, which formalised an interpretation of the theory of John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

 (see Keynesianism). The model describes the economy as a balance between three commodities: money, consumption and investment. Hicks himself did not embrace the theory as he interpreted it; and, in a paper published in 1980, Hicks asserted that it had omitted some crucial components of Keynes's arguments, especially those related to uncertainty
Uncertainty
Uncertainty is a term used in subtly different ways in a number of fields, including physics, philosophy, statistics, economics, finance, insurance, psychology, sociology, engineering, and information science...

.

See also


  • Contributions to liberal theory
    Contributions to liberal theory
    Individual contributors to classical liberalism and political liberalism are associated with philosophers of the Enlightenment. Liberalism as a specifically named ideology begins in the late 18th century as a movement towards self-government and away from aristocracy...

  • Hicksian demand function
    Hicksian demand function
    In microeconomics, a consumer's Hicksian demand correspondence is the demand of a consumer over a bundle of goods that minimizes their expenditure while delivering a fixed level of utility. If the correspondence is actually a function, it is referred to as the Hicksian demand function, or...

  • Hicks optimality
    Hicks optimality
    In game theory, a Hicks-optimal outcome, named after John Hicks, is an outcome in which the total payoff for all of the players of a game is the most it could possibly be. A Hicks-optimal outcome is always Pareto efficient....


  • Hicks-neutral technical change
    Hicks-neutral technical change
    A Hicks-neutral technical change is a change in the production function of a business or industry which satifies certain economic neutrality conditions. The concept of Hicks neutrality was first put forth in 1932 by John Hicks in his book The Theory of Wages...

  • Liberalism
    Liberalism
    Liberalism is the belief in the importance of liberty and equal rights. Liberals espouse a wide array of views depending on their understanding of these principles, but generally, liberals support ideas such as constitutionalism, liberal democracy, free and fair elections, human rights,...

  • List of economists
  • Nobel Prize in Economics


Selected publications

  • 1932, 2nd ed., 1963. The Theory of Wages
    The Theory of Wages
    The Theory of Wages is a book by the British economist John R. Hicks published in 1932 . It has been described as a classic microeconomic statement of wage determination in competitive markets...

    . London, Macmillan.
  • 1934. "A Reconsideration of the Theory of Value," with R. G. D. Allen
    R. G. D. Allen
    Sir Roy George Douglas Allen, CBE, FBA was an English economist, mathematician and statistician.Allen was born in Worcester and educated at the Royal Grammar School Worcester, from which he won a scholarship to Sidney Sussex College, Cambridge...

    , Economica.
  • 1937. "Mr Keynes and the Classics: A Suggested Interpretation," Econometrica.
  • 1939. "The Foundations of Welfare Economics", Economic Journal.
  • 1939, 2nd ed. 1946. Value and Capital
    Value and Capital
    Value and Capital is a book by the British economist John Richard Hicks, published in 1939. It is considered a classic exposition of microeconomic theory...

    . Oxford: Clarendon.
  • 1940. "The Valuation of Social Income," Economica, 7:105–24.
  • 1941. "The Rehabilitation of Consumers' Surplus," Review of Economic Studies.
  • 1942. The Social Framework: An Introduction to Economics.
  • 1950. A Contribution to the Theory of the Trade Cycle, Oxford: Clarendon.
  • 1956. A Revision of Demand Theory, Oxford: Clarendon.
  • 1958. "The Measurement of Real Income," Oxford Economic Papers.
  • 1959. Essays in World Economics, Oxford: Clarendon.
  • 1961. "Measurement of Capital in Relation to the Measurement of Other Economic Aggregates", in Lutz and Hague, editors, Theory of Capital.
  • 1965. Capital and Growth. Oxford: Clarendon.
  • 1969. A Theory of Economic History. Oxford: Clarendon. Scroll to chapter-preview links.
  • 1970. "Review of Friedman", Economic Journal.
  • 1973. "The Mainspring of Economic Growth", Nobel Lectures, Economics 1969-1980, Editor Assar Lindbeck, World Scientific Publishing Co., Singapore, 1992.
  • 1973. Autobiography for Nobel Prize
  • 1974. "Capital Controversies: Ancient and Modern", American Economic Review.
  • 1975. "What Is Wrong with Monetarism", Lloyds Bank Review.
  • 1976. Economic Perspectives. Oxford: Clarendon
  • 1979, “The Formation of an Economist.” Banca Nazionale del Lavoro Quarterly Review, no. 130 (September 1979): 195-204.
  • 1980. "IS-LM: An Explanation," Journal of Post Keynesian Economics.
  • 1981. Wealth and Welfare: Vol I. of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
  • 1982. Money, Interest and Wages: Vol. II of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
  • 1983. Classics and Moderns: Vol. III of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
  • 1989. A Market Theory of Money. Oxford University Press.

External links

  • http://cepa.newschool.edu/het/profiles/hicks.htm