John R. Hicks: Life, Work, and Legacy

Key points
* John R. Hicks (1904–1989) was a leading British neo‑Keynesian economist whose work shaped 20th‑century microeconomics, macroeconomics, and welfare economics.
* His major contributions include the elasticity of substitution, the Hicksian compensated demand curve, the IS‑LM macroeconomic model, Value and Capital (1939), and the Hicks compensation criterion in welfare analysis.
* He received a knighthood in 1964 and the Nobel Memorial Prize in Economic Sciences in 1972 (shared with Kenneth Arrow) for advances in general equilibrium and welfare theory.

Early life and career
* Born April 8, 1904, in Warwick, England; died May 20, 1989.
* Educated at Clifton College and Oxford (studying economics, mathematics, philosophy, and politics).
* Academic posts included the London School of Economics (lecturer, 1926–1935), Cambridge, the University of Manchester, and a return to Oxford in 1946.
* Married economist Ursula Webb in 1935; Webb was a founder of the Review of Economic Studies.

Major contributions and ideas

Elasticity of substitution
* Introduced and developed the concept of elasticity of substitution between capital and labor.
* Used this concept to show that labor‑saving technological change does not automatically reduce labor’s share of income.

Theory of Wages
* His early book Theory of Wages developed microeconomic analysis of wage determination in competitive and regulated labor markets.
* Influential in labor economics and in debates about capital, technology, and distribution.

Value and Capital (1939)
* Brought rigorous mathematical treatment to consumer theory and price analysis for English‑speaking audiences.
* Introduced the Hicksian (compensated) demand curve, clarified income and substitution effects, and used composite goods to simplify demand modeling.
* Formalized comparative statics and presented Walrasian general equilibrium analysis in a modern framework.

IS‑LM model
* Formalized a framework linking the goods market (IS curve: investment–saving) and the money market (LM curve: liquidity preference–money supply).
* Demonstrated how an economy can be in short‑run equilibrium with less‑than‑full employment and how interest rates and output respond to fiscal and monetary changes.
* Became a standard classroom tool and a foundation for many policy discussions in macroeconomics.

Welfare economics — Hicks compensation principle
* Proposed a compensation test (often called Hicks efficiency) to evaluate policy changes: a change is judged an improvement if winners could in principle compensate losers and still be better off.
* Helped shape modern welfare economics and debates over Pareto improvements and potential compensation criteria.

Honors and legacy
* Knighted in 1964; awarded the Nobel Prize in Economic Sciences in 1972 (shared with Kenneth Arrow) for work on general equilibrium and welfare economics.
* Value and Capital, the IS‑LM framework, and his work on demand theory and welfare remain central to economic teaching and research.
* Hicks’s methods and concepts continue to influence theoretical and applied economics, from price theory to macroeconomic stabilization policy.

Conclusion
John R. Hicks combined mathematical clarity with economic insight to formalize core concepts across microeconomics and macroeconomics. His models and tests—most notably Value and Capital, the IS‑LM framework, and the Hicks compensation criterion—remain foundational in economic theory and pedagogy.