The Elder Hicks

The Elder Hicks

In 1972 Hicks received a Nobel prize for his earlier work on 'general equilibrium and welfare economies'. However, Hicks points out that 'it was with mixed feelings that I found myself honoured for that work which I myself found myself to have outgrown' (1977, p. v). The dividing line between his earlier and later writings is not obvious, even to Hicks, but roughly speaking the earlier period ended with the publication of his Trade Cycle in 1950 and his more recent work, which he claims was written from a different perspective, begins with Capital and Growth (1965). However, two earlier publications (1956b, 1963) are also import­ant and in referring to the 1956 article Hicks acknowledges that it was not until recently that he 'realised how important it is in explaining the development of my thought. It is the beginning of my new work in this field' (1979c).

Taking this as our starting point it is not difficult to demon­strate that there are a number of common themes permeating his later works and that though they may appear superficially different they do on balance hang together and to some extent fortify each other. They offer the reader some penetrating insights into the most controversial areas of current economic theory -capital, growth and money - as well as continuing to shed light on the interpretation, meaning and significance of the Keynesian revolution.

It is both surprising and unfortunate that these later works have not been read with the same spirit of enthusiasm that so obviously greeted his earlier works. Consequently our analysis of these works must inevitably be more limited in scope because this is not the right place to attempt a perspective on largely uncharted areas in economic theory. Therefore this section will attempt only to convey to the reader the method of approach that Hicks now invariably makes use of and to identify the challenge that he so openly presents to current economic theorists.

In pursuing these themes we will concentrate the analysis in five related areas: historical processes; flexprice/fixprice markets; liquidity theory; growth theory; causality.

Historical Processes

In developing these new themes the Elder Hicks did not start from scratch. Rather he used parts of his earlier works (particularly 1932, 1935, 1939a and 1950) to develop new analytical techniques. The direction of his thinking can be clearly discerned from three recent publications (1976, 1977, 1979b). In these he points out that the basic fault of his earlier works was the essentially static nature of even those processes that claimed to be dynamic, e.g. in Value and Capital the concept of the 'week' was only partially dynamic; it did have a past (embedded in the inherited capital stock) and an unknown future (about which expectations were formed) but on 'Monday' both price expec­tations and current transactions were all wrapped up in an equilibrium and simultaneously solved.

In order to avoid this relapse into statics Hicks's analysis is now grounded in historical processes which are 'in time'. The thing to note about 'time' is that it is irreversible; the past is unalterable (but we do have knowledge of it) while the future is unknowable (though it will eventually become known in the sense that the future eventually becomes the present). In analysing the past economists often ignore this very obvious fact and tend to analyse the relationship between (say) 1974 and 1975 in the same way as the relationship between 1974 and 1973 even though transactions in 1974 were based upon knowledge of 1973 but only on expectations about 1975.

The trouble with Value and Capital was that it was not 'in time' in this sense; the artificiality of its constructions did 'deliberate violence to the order in which in the real world events occur'. (Capital and Growth, 1965, p. 73) There were three aspects of that analysis that were particularly defective. In the first place since prices were determined in an equilibrium manner on 'Monday' the analysis contained no real theory of markets. Secondly, the failure to adequately account for the effects of uncertainty on the postponement of decision-making meant that the analysis lacked a theory of liquidity. Finally, the relationship between 'Monday' and 'Monday week' was never explored so that the weeks were never effectively linked together i.e. the analysis also contained no real theory of growth. Thus, the analysis of market structures, liquidity and growth, with the emphasis on historical processes, forms the basis of Hicks's latest contributions to economic theory.