Hicks in Reviews, 1932-1989

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Hicks in Reviews, 1932-1989:

From The Theory of Wages to A Market Theory of Money*

Warren Young

Introduction

For over a half-century, from the " years of high theory", through the decline of Keynesianism and rise of Monetarist and New Classical alternatives, Hicks made fundamental contributions to economics.

In this paper, I survey the reception of his books, from The Theory of Wages through Value and Capital to A Market Theory of Money. I do so in order to gauge the initial reactions to his path-breaking work; which range from high praise to harsh criticism: if critical, depending upon patrimonies some reviewers were "defending" against Hicksian insights; if supportive, depending on the degree to which they identified with his analytical methods.

The medium of the book review has a peculiar place in the history of economics, especially as regards reviews of Hicks’ work, many of which have been overlooked. To reassess all reviews of Hicks is not the object of the present paper. Indeed, that would be a Herculean task. What I will try to present is a systematic way of dealing with his reviews and reviews of his work by surveying what I consider to be key reviews of Hicks.

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*: copyright Warren Young. Forthcoming in Markets, Money and Capital: Hicksian Economicsfor the 21st Century (edited by R. Scazzieri, A.K. Sen and S. Zamagni), Cambridge University Press, 2006. Not for Quotation without permission of author and editors.

In order to accomplish this, I distinguish between purposive reviews, critical or supportive, as against substantive reviews, dealing with an essential central message. Such a demarcation between "types" of review can be complemented by reference to their "focus". Toulmin (1972, 307-13) distinguished between "external" and "internal" analytical focus. In his view, “external" focus is on the institutional and personal history of a scientific discipline, whereas " internal" focus is on the intrinsic importance of contributions in the discipline as the basis for " take off" into further self-sustained theoretical development. Hicks’ published volumes consisted of three types: original monographs, lectures, and collected essays. While the specific central message can be identified in his monographs, the other types of volumes--lectures and collected essays—need a unifying scheme. This can be accomplished by identifying major, minor and integrating themes in them. I will be using the classificatory framework outlined above to deal with reviews of his books.

The Theory of Wages (1st and 2nd editions)

Shove’s " famous review", as Reder put it (1965, 88) of the first edition of The Theory of Wages (1932) in the September 1933 issue of EJ , was not the first review of the book. Clay, in the August 1933 issue of Economica had reviewed it in positive terms overall, and even suggested (1933, 332) that Hicks extend his approach from static to dynamic analysis; something which Hicks undertook over the years after the Theory of Wages was published, as manifest in " Wages and Interest: the dynamic problem" (1935b), and which culminated in V&C (1939). Shove’s critical review essay on Hicks’ book is well known and will not be discussed in detail here. What is interesting to recall, however, is that in the second edition of the book (1963), not only did Hicks include Shove’s review of the 1932 edition but a long “commentary" which, as Reder put it in his review of the second edition, attempted "to present a Shove-proof argument” (1965,88).

Hicks’ 1932 book was also reviewed in two leading American journals, AER and JPE. In his AER review, Morrison (1933) took issue with Hicks’ application of “marginal productivity theory” to wage determination, but did not go further in his criticism (1933, 687). In his February 1935 JPE review, on the other hand, Director was more forthright, when, in effect, he “damned” the book with “faint praise”. According to Director, there was not “much that is new” in the first part of the book, although he still found it “precise and judicious”. Moreover, while Director wrote that “Hicks’ conclusion that labor-saving inventions will predominate" was “ingenuous", he also said it was " hardly convincing" (1935, 109-110). Director then described the second part of the book as “not of equal merit". He went on to say that Hicks’ " theoretical consideration" regarding the “consequences of wage regulation" was "to be congratulated" for " thoroughness", and went on to criticize Hicks for “his further suggestion” regarding the applicability of Bohm-Bawerk’s approach to capital theory (" time structure" or “period of production"), as being " quite unsatisfactory". (1935, 110-111).

The reputation of the Theory of Wages, however, was rehabilitated in the reviews of the second edition, especially in those of Reder (1965) and Kruger (1965). Although critical on some points, Reder concluded (1965, 90) "All in all, The Theory ofWages has been an important book that continues to exert an influence on economic thought”. In his review of the second edition in the Canadian Journal ofEconomics , Kruger wrote (1965,164) " On re-reading the original volume one is struck by the mixture of the pioneering and the archaic, which it contained. However, there is still much that economists, and in a particular labour economist can learn here… This book should interest most economists. Not only do we have here a reprint of a classic in its field, but we are also provided with a view of the intellectual growth of one of the great economists of this generation”.

Value and Capital and its Mathematical Appendix

In my survey of "The early reactions to Value and Capital" (1991), I dealt with reviews of V&C by Firth (1939), Haley (1939), Boulding (1939), Harrod (1939), Hawtrey(1939), Lerner (1940), and Morgenstern (1941). These reviews ranged from highly complimentary (Lerner) to highly critical (Morgenstern). Two important reviews that I did not deal with in my 1991 survey were Bowley’s Sept. 1938 EJ review of Hicks’ Theorie Mathematique de la Valeur en Regime de Libre Concurrence (1937), which eventually appeared as the Mathematical Appendix to V&C, and Machlup’s 1940 QJE review essay on the first part of V&C, which he called " Prof. Hicks' Statics ". And this, because at the time I focused upon Lerner's review essay on the dynamic part of the book, which appeared in the same journal volume immediately after the Machlup’s treatment of Hicks’ statics (Young, 1991, 299).

Because of the importance of Bowley’s EJ review of Hicks’ 1937 work, I will be dealing with it at length here, and also provide a translation of the only sentence on dynamics in Hicks’ “booklet” (published in French). Bowley started by placing Hicks’ 1937 "booklet", the title of which, when translated, is Mathematical Theory of Value in a Free Competition System, in historical context. As he wrote (1938,513-14), it was "in principle a preliminary study to a forthcoming work by the same author on Value and Capital... we find here a development of the very important methods initiated in 1934 by Hicks and Allen in Economica under the title ‘A Reconsideration of the Theory of Value’ ... the earlier articles related to one individual with a complex of preferences for any number of goods, the formulae being worked out for three goods only. But now we have the analysis extended to include any number of goods (Chapter I), any number of consumers (Chapter II) and any number of producers (Chapter III)…It is to be hoped that in his larger work the author will justify these processes”. Bowley continued (1938, 514) " Generally the treatment here makes great demands on mathematical knowledge and owing to compression sometimes fails in lucidity. In the new work there may be a place for the more exact definition of the mathematical theorems used, with proofs where it is not possible to give reference to easily accessible textbooks…” He then wrote (1938, 514-15)

The declared object of this work is not, however, the generalization of earlier formulae, but to break completely new ground. The system of equations developed by Pareto went no further than the description of a position of statical equilibrium, without further reference to its stability.

Nevertheless knowledge of the conditions and nature of statical equilibrium tell us the effect of small changes only. If equilibrium is stable, a body will remain at or near its position, till larger or continued disturbances take place, and then we are faced with dynamic problems. Is perhaps important to make clear that here there is no treatment of dynamical economics…

Bowley then cited what he called Hicks’ “tentative” statement on dynamics that appeared page 53 in the 1937 “booklet” (1938, 515), the translation of which is “Then, by assuming that these conditions are still valid in the neighborhood of the equilibrium condition, we can arrive at some formal conclusions regarding the price mechanism system”. In any event, while Hicks’ 1937 “booklet” formed the basis for the Mathematical Appendix to V&C, it still remains to be translated!

Machlup’s February 1940 QJE review essay “Prof. Hicks Statics” consisted of a long and detailed survey of parts I and II of V&C, which he described (1940,277) as “a great book". Machlup opened his survey by stating (1940,277) that for Hicks " all economic theory is equilibrium theory". When presenting Hicks’ analysis of consumption " as a function of income and a function of price", Machlup correctly noted (1940, 282, note 8) that in is 1937 "booklet" Hicks had already dealt with the effects of price changes in terms of elasticities". Machlup also noted (1940, 284-85, note 2) that he had corresponded with Hicks on a specific point in the book due to problems in clarity, and continued on to describe other points made by Hicks as " “complicated " and " paradoxical ", until the reader of V&C “discovers at some inconspicuous place the assumption from which everything follows" (1940, 285). Indeed, it would be interesting to analyze the Machlup- Hicks correspondence if it could be found. In any event, Machlup then proceeded to deal with possible critiques of the book (1940,293-97) and concluded (1940,297)

The study of Professor Hicks’ work has cost me more effort per page than any other book I have read in economics. But it was well worth it. I believe that this book is certain to become a ‘classic’.

Reviews of The Social Framework, 1942-1952

Hicks published The Social Framework in 1942, and the book was well received in both its first and subsequent adaptations (1946) and 2nd edition (1952). Hicks approach in the book was original, as it was in effect, the first textbook based on what he termed "social accounting". In his Economica review, Guillebaud praised Hicks for "breaking new ground (1943, 191). In the December 1943 issue of EJ, Austin Robinson compared Hicks’ approach to that in Boulding’s Economic Analysis, which he reviewed in the same piece. Robinson made the cogent point that " Boulding’s book represents the American approach" (1943, 387), and went on to criticize it when counterpointed to Hicks’ approach in The Social Framework. Robinson praised Hicks "originality" in taking an"applied economics", rather than a theoretical approach (1943,390-92). Taking a lead from the adaptation of Meade's Economic Analysis and Policy (1936) to the American market by Meade and Hitch (1938), Hicks and Hart published The Social Framework of the American Economy in 1945. Meyers reviewed it in the June 1946 issue of JPE. Interestingly enough, in his mostly favorable review, Meyers pointed out that "the introduction as given is equally suitable for a Keynesian or non Keynesian subsequent treatment" (1946, 275). Adams very favorably reviewed the Hicks-Hart volume in the June 1947 issue of AER, saying that it " stikes a beautiful balance between simplicity and subtlety" (1947,428). The second edition of The Social Framework was also favorably reviewed in the November 1952 issue of Economica, especially in light of the two supplementary chapters Hicks has added to it.

Reviews of A Contribution to the Theory of the Trade Cycle and Revision of Demand Theory, 1950-1957

In his review essay on Hicks Trade Cycle book, in the August 1950 issue of QJE, Duesenberry critically dealt with this "very concise volume", which he described as “ingeniously contrived and urbanely expressed" (1950, 464). As he wrote (1950, 466), “Hicks theory is an elegant one, but if we look at it closely its validity seems doubtful. There are a number of weak points in the theoretical structure. In addition there is considerable doubt about the empirical validity of some of fundamental assumptions”.

However, in his concluding remarks, Duesenberry toned down his critique somewhat (1950,476).

IntheNovember1950issueofReviewofEconomicsand Statistics, Richard Goodwin published a reviewessayonHicks’ Trade Cycle book. Goodwin'sarticleisaprimeexampleofa substantive review withinternalfocus. Goodwin’s positive and insightful review placedthebook intheperspectiveofthetreatmentsofthecyclethatprecededHicks, and Hicks’ contribution, which formed thebasis formuchsubsequentwork-- boththeoreticalandempirical-- inthefieldofbusinesscycleanalysis.

Lerner also reviewed Hicks’ book in the October 1951 issue of Econometrica. One of the most important points made by Lerner is that regarding the treatment of expectations in the book--or lack of it. As Lerner noted (1951, 473) "Still more surprising is the absence, in a book by the inventor of the ‘elasticity of expectations,’ of any discussion of different expectations in the determination of either investment or consumption". And, in a prescient conclusion, Lerner wrote (1951, 473-474)

What is clearly demonstrated by this important work is the infinitely greater returns to be expected, at this stage, from top-level economic theorizing than from the exponential accumulation of statistics. And if this is true for the theory of the trade cycle, it is even truer for the theory of achieving and maintaining economic stability and prosperity in a free society, where complex lags and reactions in consumption and investment may be difficult to manage. It is hoped that Hicks and his pupils throughout the world will now apply themselves more directly to this task, for which the theory of the trade cycle is an excellent training ground, even if it should yield no directly applicable results.

Kaldor’s December 1951 EJ review essay on Hicks’ Trade Cycle book was constructively critical with an external focus. Indeed, as Lerner, Kaldor lamented the fact that “on the subject of expectations, to which Mr. Hicks made such distinguished contributions in the past, the present work is remarkably silent…It is very much to be hoped that the distinguished author of Value and Capital will return again to that field…which he seems for the present to have forsaken” (1951,839,846). Kaldor ended his review essay, which, while critical at points, by saying “I have devoted so much space to what appeared to me the unsettled issues, that I must have failed to convey an adequate appreciation of the many brilliant and original pieces of analysis with which Mr. Hicks’ latest work abounds.” (1951, 847).

Stigler critically reviewed Hicks’ A Revision of Demand Theory (1956) in the April 1957 issue of JPE. In his review, Stigler wrote (1957, 169) " On the one hand, the volume elicits strong admiration, for it is a superb pedagogical performance: lucid, orderly, and ingenious in the exposition of modern utility theory. On the other hand, the volume is of little substantive interest: its chief purpose is to teach well known theorems by the use of elementary tools. One is compelled to question the significance of the task while admiring the performance”. Stigler went further when he critically remarked (1957, 169) " the scope of ‘demand theory’ is narrowly defined… the literature dealing with interdependence of utility functions of different persons is also brushed aside". But, Stigler did recognize that the book was " a halfway bridge to a promised volume on welfare economics" (1957, 170). It must be recalled at this point, however, that Stigler may have perceived Hicks’ book as competitor to his own Theory of Price text (1946 1st ed, 1952 2nd ed.).

Essays in World Economics, 1959-1960

This book (1959) was reviewed in the June 1960 issue of the AER by Stokes, by Johnson in August 1960 in Economica, and by Brown in the EHR in 1960. Stokes favorably reviewed it and focused on its implications for U.S. economic policies, calling it “one of the most powerful condemnations" of U.S. polices “that has yet appeared "; albeit something which Hicks “would be first to deny" (1960,485). Johnson was somewhat disappointed in the volume, which he said was composed of Hicks’ "more popular ‘policy’ pieces of the bank review and tourist lecture type" (1960, 279). Johnson described Hicks’ approach as problematic and criticized his views on "government economic control" and Hicks’ treatment of "exceptions” in his "simple models" and “generalizations” (1960, 279-280), while Brown reviewed Hicks somewhat more objectively, focusing upon his treatment of inflation (1960,304).

Reviews of Capital and Growth

In his 1965 volume, Capital and Growth, Hicks returned to themes raised in his seminal " V&C growth model" paper (1959), and went beyond them. Reviews of the book included those by Hahn in the March 1966 EJ, Dewey in the September 1966 Journal of Finance, and Solow in the December 1966 issue of AER. While sympathetic in general to Hicks’ central message, reviewers were critical, in places, of the way he tried to put it across. Hahn, for example, praised the "quality of exposition" and "lucidity of thought" exhibited in part I of the book, which Hicks called "Methods of Dynamic Economics", and thought part II (" Growth Equilibrium”) to be "an extremely skillful exposition". But Hahn had reservations regarding some sections of part III ("Optimum Growth”) especially that dealing with "optimum savings",and part IV ("After Growth Theory") , due to Hicks’ omission of literature references and detailed discussion of certain issues such as the "aggregation problem" (1966, 84-87). Despite this, Hahn concluded "for a first-rate progress report on the state of play in current growth theory (which may yet prove abortive, go to Hicks"(1966, 87). Dewey, on the other hand, was critical of many aspects of Hicks’ book, especially its literary style and " form of argument", accusing Hicks of writing “like a graduate student’s caricature of an Oxford economist”(1966,568). What Dewey seemed to forget, however, was that the contributions of Oxford economists, from Edgeworth through Hicks, are at the core of modern economics (Young and Lee, 1993).

Solow opened his review of Capital and Growth by saying that the book was "unmistakably Hicks" (1966, 1257). He started his analysis of the substance of the book by reference to part II, dealing with growth equilibrium, which called "the best part of the book". In his discussion of Hicks’ treatment of "saving behavior", Solow utilized Shell’s distinction between “non-steady state” as against “steady state" behavior. He then linked the nature of the assumption of a fixed wealth-income ratio to expectations. As Solow put it " in such models, the assumption that expectations are fulfilled generates paths that diverge from the steady state", but citing Shell, continued on to say " if producers maximize present value and savers maximize utility, full competitive equilibrium leads to the steady state" (1966, 1258). In other words, as early as 1966 Solow was saying that, given the conditions of rationalexpectations and perfect competition, under neoclassical assumptions, such aneconomy would converge to steady state equilibrium accordingly. Solow then turned to parts III and IV of the book, and said that the former made "accessible the whole range of difficult and important modern theory” (1966, 1259). To sum up, Solow’s position was "anyone who wants to introduce himself or his students to the large volume of recent work on the structure of equilibrium growth will turn to Hicks. This is exposition made into a fine art. And it is more than that; there are some interesting ideas as well. One could hardly expect otherwise" (1966, 1258). When Solow’s balanced piece is counterpointed to that of Dewey’s, one immediately distinguishes between the substantive as against purposive types of review of Hicks’ work.