Hicks was born in 1904 inWarwick, England, and was the son of Edward Hicks, editor and part proprietor of the Warwick and Leamington Spa Courier newspaper, and Dorothy Catherine, née Stephens, daughter of a non-conformist minister.[3][4]
He was educated atClifton College (1917–1922)[5] and atBalliol College, Oxford (1922–1926), and was financed by mathematical scholarships. During his school days and in his first year at Oxford, he specialised in mathematics but also had interests in literature and history. In 1923, he moved toPhilosophy, Politics and Economics, the "new school" that was just being started at Oxford. He graduated withsecond-class honours and, as he stated, "no adequate qualification in any of the subjects" that he had studied.[6]
From 1935 to 1938, he lectured atCambridge where he was also a fellow ofGonville & Caius College. He was occupied mainly in writingValue and Capital, which was based on his earlier work in London. From 1938 to 1946, he was Professor at theUniversity of Manchester. There, he did his main work on welfare economics, with its application to social accounting.
Hicks's early work as alabour economist culminated inThe Theory of Wages (1932, 2nd ed. 1963), still considered standard in the field. He collaborated with R.G.D. Allen in two seminal papers onvalue theory published in 1934.
Hismagnum opus isValue and Capital published in 1939. The bookbuilt onordinal utility and mainstreamed the now-standard distinction between thesubstitution effect and theincome effect for an individual indemand theory for the 2-good case. It generalised the analysis to the case of one good and acomposite good, that is, all other goods. It aggregated individuals and businesses through demand and supply across the economy. It anticipated theaggregation problem, most acutely for the stock of capital goods. It introducedgeneral equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium. In the course of analysis Hicks formalisedcomparative statics. In the same year, he also developed the famous "compensation" criterion calledKaldor–Hicks efficiency for welfare comparisons of alternative public policies or economic states.
Hicks's influential discourse onincome sets the basis for its subjectivity but relevancy for accounting purposes. He aptly summarized it as follows. "The purpose of income calculations in practical affairs is to give people an indication of the amount they can consume without impoverishing themselves".[11]
Formally, he defined income precisely in three measures:
Hicks's number 1 measure of income: "the maximum amount, which can be spent during a period if there is to be an expectation of maintaining intact the capital value of prospective receipts (in money terms)" (Hicks, 1946, p. 173)[12]
Hicks's number 2 measure of income (market price-neutral): "the maximum amount the individual can spend during a week, and still expect to be able to spend the same amount in each ensuing week" (Hicks, 1946, p. 174).[12]
Hicks's number 3 measure of income (takes into account market prices): "the maximum amount of money which an individual can spend this week, and still expect to be able to spend the same amount in real terms in each ensuing week" (Hicks, 1946, p. 174)[12]
Sen, Amartya;Zamagni, Stefano; Scazzieri, Roberto (2008).Markets, money and capital: Hicksian economics for the twenty-first century. Cambridge, UK New York: Cambridge University Press.ISBN978-0521873215.
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