John Hicks (1904–1989)
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Who They Were
John Hicks (1904-1989) was a British economist whose work bridged microeconomic theory and macroeconomics. Early in his career he published a 1937 paper introducing the IS-LM model, which reduced much of Keynes's General Theory to a diagram of the joint equilibrium of the goods and money markets, a simplification Hicks himself later regarded with reservations, but which became the standard teaching tool for decades. His book Value and Capital (1939) advanced general equilibrium and capital theory and examined why lenders require extra compensation for committing funds over longer periods. In 1972 he shared the Nobel Memorial Prize with Kenneth Arrow for their pioneering contributions to general equilibrium and welfare theory; the following year Wassily Leontief was honoured for input-output analysis. Hicks was among the most versatile theorists of his generation.
Key Contributions
Hicks's IS-LM model, set out in 1937, translated Keynes's General Theory into a compact diagram showing where the goods market and the money market are simultaneously in equilibrium; despite his own later doubts, it became the workhorse of macroeconomic teaching for decades. In Value and Capital (1939) he developed general equilibrium and consumer theory, refining tools such as the distinction between income and substitution effects. He also contributed to the theory of interest rates, arguing that lenders must be compensated for tying up funds, which introduces a term premium that normally makes long rates exceed the average of expected short rates. His work on general equilibrium and welfare economics, shared with the Arrow strand, earned him the Nobel Memorial Prize in 1972.
On EconRecall
British economist and 1972 Nobel laureate; author of Value and Capital and creator of the IS-LM diagram of Keynes's theory. Play the games that feature John Hicks: