Hicks, John Richard (1904–1989)

English economist. Hicks is celebrated for his invention of the IS–LM diagram, which expounds the true meaning of English economist John Maynard Keynes's General Theory. He shared the Nobel Prize for Economics in 1972 with US economist Kenneth Arrow for his contributions to general economic equilibrium theory.

Much of Hicks's work has become a standard part of the tool kit of modern economists: his early work on the marginal productivity theory of distribution; his subsequent contributions to the New Welfare Economics; his invention of the IS–LM diagram; his masterpiece Value and Capital (1939), which taught a whole generation of economists to employ indifference curves and general equilibrium theory; and his more recent synthesizing work on growth theory.

The IS–LM apparatus is a perfect example of Hicks's unusual ability to synthesize the ideas of other economists. This is a diagram in which the whole of Keynes's General Theory is expressed as an intersection of two curves, one reflecting the equilibrium of saving and investing (IS) and the other the equilibrium of the demand and supply of money (LM). Keynes's General Theory (1936) is a confusing book and many who have read it have failed to grasp its central message; it attacks something called ‘classical economics’ but it is not clear what this is and who these classical economists are. Hicks realized that much of Keynes's book involves a contrast between a market for goods and services, in which planned saving and investment is brought into equilibrium via changes in total income, and a market for money, in which the demand for and supply of money is brought into equilibrium via changes in the rate of interest; moreover, both markets have to be in equilibrium simultaneously in order to produce equilibrium at less than full employment. Hicks therefore invented a diagram to depict that ‘unemployment equilibrium’. Hicks went on to show that Keynes took one view of the typical slopes of the IS and LM curves, whereas his predecessors, the ‘classics’, took another, and it is the difference in beliefs about the slopes of the two sets of curves which accounted for the contrast between Keynes's policy recommendations and those of his predecessors. In other words, the purpose of the IS–LM apparatus must not be misunderstood.

Hicks was born in Leamington Spa, England. Graduating from Oxford University in 1925, he continued his studies before joining the staff of the London School of Economics (LSE) in 1926. He left LSE in 1935 to take up a professorship at the University of Manchester, where he remained until 1946. Moving to a fellowship and then a professorship at Nuffield College, Oxford, he retired from active academic life in 1965. He was knighted in 1964.

His publications include The Theory of Wages (1932), Social Framework: An Introduction to Economics (1942), A Contribution to the Theory of the Trade Cycle (1950), Capital and Growth (1965), and A Theory of Economic History (1969).