Sir John Hicks
John Richard Hicks
8 April 1904
Warwick, England, UK
|Died||20 May 1989 85) (aged|
Blockley, England, UK
|Institution|| Gonville and Caius College, Cambridge |
London School of Economics
University of Manchester
Nuffield College, Oxford
|Alma mater||Balliol College, Oxford|
|Influences||Léon Walras, Friedrich Hayek, Lionel Robbins, Erik Lindahl, John Maynard Keynes|
|Contributions|| IS–LM model |
Capital theory, consumer theory, general equilibrium theory, welfare theory, induced innovation
|Awards||Nobel Memorial Prize in Economic Sciences (1972)|
|Information at IDEAS / RePEc|
Sir John Richards Hicks (8 April 1904 – 20 May 1989) was a British economist. He is considered 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 in microeconomics, and the IS–LM model (1937), which summarised a Keynesian view of macroeconomics. His book Value and Capital (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 contributions to general equilibrium theory and welfare theory.
Hicks was born in 1904 in Warwick, England, and was the son of Dorothy Catherine (Stephens) and Edward Hicks, a journalist at a local newspaper.
He was educated at Clifton College (1917–1922)and at Balliol College, Oxford (1922–1926), and was 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" that was just being started at Oxford. He graduated with second-class honors and, as he stated, "no adequate qualification in any of the subjects" that he had studied.
From 1926 to 1935, Hicks lectured at the London School of Economics and Political Science.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. Hicks's influences included Lionel Robbins and such associates as Friedrich von Hayek, R.G.D. Allen, Nicholas Kaldor, Abba Lerner and Ursula Webb, the last of whom, in 1935, became his wife.
From 1935 to 1938, he lectured at Cambridge where he was also a fellow of [Gonville and Caius College, Cambridge[|Gonville & Caius College]]. He was occupied mainly in writing Value and Capital, which was based on his earlier work in London. From 1938 to 1946, he was Professor at the University of Manchester. There, 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 (1946–1952) then as Drummond Professor of Political Economy (1952–1965) and finally as a research fellow of All Souls College (1965–1971), where he continued writing after his retirement.
Hicks was knighted in 1964 and became an honorary fellow of Linacre College. He 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's Library Appeal in 1973.He died on 20 May 1989 at his home in the Cotswold village of Blockley.
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Hicks's early work as a labour economist culminated in The Theory of Wages (1932, 2nd ed. 1963), still considered standard in the field. He collaborated with R.G.D. Allen in two seminal papers on value theory published in 1934.
His magnum opus is Value and Capital published in 1939. The book built on 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 generalised the 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. 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. In the same year, he also developed the famous "compensation" criterion called Kaldor–Hicks efficiency for welfare comparisons of alternative public policies or economic states.
Hicks's most familiar contribution in macroeconomics was the Hicks–Hansen IS–LM model,published in his paper “Mr. Keynes and the "Classics"; a suggested interpretation”. This model formalised an interpretation of the theory of John Maynard Keynes (see Keynesian economics), and describes the economy as a balance between three commodities: money, consumption and investment. Hicks himself wavered in his acceptance of his IS–LM formulation; in a paper published in 1980 he dismissed it as a ‘classroom gadget’.
Hicks's influential discourse on income sets the basis for its subjectivity but relevancy for accounting purposes. He aptly summarized it as follows. “The purpose of income calculations in practical affairs is to give people an indication of the amount they can consume without impoverishing themselves”.
Formally, he defined income precisely in three measures:
Hicks's number 1 measure of income: “the maximum amount, which can be spent during a period if there is to be an expectation of maintaining intact the capital value of prospective receipts (in money terms)” (Hicks, 1946, p. 173)
Hicks's number 2 measure of income (market price-neutral): "the maximum amount the individual can spend during a week, and still expect to be able to spend the same amount in each ensuing week” (Hicks, 1946, p. 174).
Hicks's number 3 measure of income (takes into account market prices): “the maximum amount of money which an individual can spend this week, and still expect to be able to spend the same amount in real terms in each ensuing week” (Hicks, 1946, p. 174)
Keynesian economics are the various macroeconomic theories and models of how aggregate demand strongly influences economic output and inflation. In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy. Instead, it is influenced by a host of factors – sometimes behaving erratically – affecting production, employment, and inflation.
Macroeconomics is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and government spending to regulate an economy’s growth and stability. This includes regional, national, and global economies. According to a 2018 assessment by economists Emi Nakamura and Jón Steinsson, economic "evidence regarding the consequences of different macroeconomic policies is still highly imperfect and open to serious criticism."
Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good or service is determined through a hypothetical maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production. This approach has often been justified by appealing to rational choice theory, a theory that has come under considerable question in recent years.
IS–LM model, or Hicks–Hansen model, is a two-dimensional macroeconomic tool that shows the relationship between interest rates and assets market. The intersection of the "investment–saving" (IS) and "liquidity preference–money supply" (LM) curves models "general equilibrium" where supposed simultaneous equilibria occur in both the goods and the asset markets. Yet two equivalent interpretations are possible: first, the IS–LM model explains changes in national income when the price level is fixed in the short-run; second, the IS–LM model shows why an aggregate demand curve can shift. Hence, this tool is sometimes used not only to analyse economic fluctuations but also to suggest potential levels for appropriate stabilisation policies.
This aims to be a complete article list of economics topics:
Nicholas Kaldor, Baron Kaldor, born Káldor Miklós, was a Cambridge economist in the post-war period. He developed the "compensation" criteria called Kaldor–Hicks efficiency for welfare comparisons (1939), derived the cobweb model, and argued for certain regularities observable in economic growth, which are called Kaldor's growth laws. Kaldor worked alongside Gunnar Myrdal to develop the key concept Circular Cumulative Causation, a multicausal approach where the core variables and their linkages are delineated. Both Myrdal and Kaldor examine circular relationships, where the interdependencies between factors are relatively strong, and where variables interlink in the determination of major processes. Gunnar Myrdal got the concept from Knut Wicksell and developed it alongside Nicholas Kaldor when they worked together at the United Nations Economic Commission for Europe. Myrdal concentrated on the social provisioning aspect of development, while Kaldor concentrated on demand-supply relationships to the manufacturing sector. Kaldor also coined the term "convenience yield" related to commodity markets and the so-called theory of storage, which was initially developed by Holbrook Working.
The Stockholm School is a school of economic thought. It refers to a loosely organized group of Swedish economists that worked together, in Stockholm, Sweden primarily in the 1930s.
Classical economics, classical political economy, or Smithian economics is a school of thought in political economy that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. Its main thinkers are held to be Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Robert Malthus, and John Stuart Mill. These economists produced a theory of market economies as largely self-regulating systems, governed by natural laws of production and exchange.
The General Theory of Employment, Interest and Money is a book by English economist John Maynard Keynes published in February 1936. It caused a profound shift in economic thought, giving macroeconomics a central place in economic theory and contributing much of its terminology – the "Keynesian Revolution". It had equally powerful consequences in economic policy, being interpreted as providing theoretical support for government spending in general, and for budgetary deficits, monetary intervention and counter-cyclical policies in particular. It is pervaded with an air of mistrust for the rationality of free-market decision making.
Michio Morishima was a Japanese heterodox economist and public intellectual who was the Sir John Hicks Professor of Economics at the London School of Economics from 1970–88. He was also professor at Osaka University and member of the British Academy. In 1976 he won the Order of Culture.
Alvin Harvey Hansen was an American economist who taught at the University of Minnesota and was later a chair professor of economics at Harvard University. Often referred to as "the American Keynes", he was a widely read popular author on economic issues, and an influential advisor to the government on economic policy. Hansen helped create the Council of Economic Advisors and the Social Security system. He is best remembered today for introducing Keynesian economics in the United States in the 1930s and 40s.
The history of economic thought is the study of the philosophies of the different thinkers and theories in the subjects that later became political economy and economics, from the ancient world to the present day in the 21st century. This field encompasses many disparate schools of economic thought. Ancient Greek writers such as the philosopher Aristotle examined ideas about the art of wealth acquisition, and questioned whether property is best left in private or public hands. In the Middle Ages, Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price.
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. Central results include:
The neoclassical synthesis (NCS), neoclassical–Keynesian synthesis, or just neo-Keynesianism was a neoclassical economics academic movement and paradigm in economics that worked towards reconciling the macroeconomic thought of John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936). It was formulated most notably by John Hicks (1937), Franco Modigliani (1944), and Paul Samuelson (1948) dominated economics in the post-war period and formed the mainstream of macroeconomic thought in the 1950s 1960s, and 1970s.
The Keynesian cross diagram is a formulation of the central ideas in Keynes' General Theory of Employment, Interest and Money. It first appeared as a central component of macroeconomic theory as it was taught by Paul Samuelson in his textbook, Economics: An Introductory Analysis. The Keynesian cross plots aggregate income and planned total spending or aggregate expenditure.
The Keynesian Revolution was a fundamental reworking of economic theory concerning the factors determining employment levels in the overall economy. The revolution was set against the then orthodox economic framework, namely neoclassical economics.
Macroeconomic theory has its origins in the study of business cycles and monetary theory. In general, early theorists believed monetary factors could not affect real factors such as real output. John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual, microeconomic parts. Attempting to explain unemployment and recessions, he noticed the tendency for people and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated the assumptions of classical economists who thought that markets always clear, leaving no surplus of goods and no willing labor left idle.
Athanasios "Tom" Asimakopulos was a Canadian economist, who was the "William Dow Professor of Political Economy" in the Department of Economics, McGill University, Montreal, Quebec, Canada. His monograph, Keynes's General Theory and Accumulation, reviews important areas of Keynes's General Theory and the theories of accumulation of two of his most distinguished followers, Roy Harrod and Joan Robinson.
The wage unit is a unit of measurement for monetary quantities introduced by Keynes in his 1936 book The General Theory of Employment, Interest and Money. A value expressed in wage units is equal to its price in money units divided by the wage of a man-hour of labour.
John Hicks's 1937 paper Mr. Keynes and the "Classics"; a suggested interpretation is the most influential study of the views presented by J. M. Keynes in his General Theory of Employment, Interest, and Money of February 1936. It gives "a potted version of the central argument of the General Theory" as an equilibrium specified by two equations which dominated Keynesian teaching until Axel Leijonhufvud published a critique in 1968. Leijonhufvud's view that Hicks misrepresented Keynes's theory by reducing it to a static system was in turn rejected by many economists who considered much of the General Theory to be as static as Hicks portrayed it.