John Hicks; The John Keynes in Macro Economics?
John
Hicks; The John Keynes in Macro Economics?
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| John Hicks |
John Richard Hicks,
one of the most influential economists ever, was born in 1904 in Warwick. After
high school he enrolled at the University of Oxford. To finance his studies he
received mathematical scholarships. He started as a math student in Oxford, but
went to London School of Economics to work as a labor economist. As a labor
economist, around 1930, Hicks published his early work in the field of labor
economics. And this was just the beginning...
In my opinion, John
Hicks his two most famous publications are his IS-LM model and his book Value
and Capital. Before discussing his IS-LM model, I would like to briefly point
out his book Value of Capital, which was published in 1939. It was a major
contribution to micro-economics and it was based on the theory of ordinal
utility and distinguishes between the substitution effect and the income effect
for an individual. Besides, Value and Capital has much more central results and
because of this is is considered a classic exposition of microeconomic theory.
Recalling John
Hicks other famous publication, the Hicks-Hansen IS-LM model, was his most
famous contribution to macro-economics. This model formalises the
interpretation of John Keynes theory. The model describes the economy as a
balance between the three markets: money, consumption and investment. At the
time of publication, in 1939, Hicks said that the IS-LM model was based on John
Keynes General Theory. Hicks embraced the theory of Keynes, however he didn't
interpret this directly into the model. However, in an article published in
1980, John Hicks claims that he didn't build the model based on Keynes theory,
he claims that he left some key elements of Keynes's argumentation out of the
model.
With winning the
Nobel prize of Economics in 1972 and publishing such important new economic
theories, we can say that John Hicks was one of the most important and
influential economist all time. However, the claim that the IS-LM model isn't
based on Keynes theory, will always be a point of a discussion. In my opinion,
John Hicks builded the model with some microeconomic Keynes theory in his mind.
On the other hand, a lot of people claim that there is no thing such as a
Keynes-Hicks macroeconomic theory. Thus, is John Hicks the John Keynes in
macroeconomics or did he created his models without relying on Keynes his
General Theory?
Sources:
4. https://larspsyll.wordpress.com/2016/08/22/keynes-hicks-macrotheory-a-new-keynesian-unicorn-fantasy/
Hicks is one of those economists who contributed broadly to the field. His contributions span both macro and micro. However, Keynes himself didn't like IS-LM. He thought it distorted what was argued in the General Theory. In contrast, many other economists liked IS-LM, because it made the ideas more transparent. The General Theory is a very difficult book to understand.
ReplyDeleteIn the future please use left adjustment of the text for your blog posts. Center adjustment makes sense for an image within the text or some other think that you clip and post. It is easier to read text if it has left adjustment.
Thank you for the feedback, I have changed the lay-out on this post. I indeed like the tension between Hicks and Keynes about the IS-LM model, that's why I focused mostly on it in this blog.
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