Value and Capital: An Inquiry into Some Fundamental Principles of Economic Theory

xi, 340 pp. Sir John R. Hicks (1904 - 1989) was a pioneering British economist who created foundational tools for both microeconomics and macroeconomics. He shared the 1972 Nobel Memorial Prize in Economic Sciences with Kenneth Arrow for their groundbreaking work on general equilibrium and welfare theory. He created the IS-LM Model to turn John Maynard Keynes's complicated macroeconomic ideas into a clear model showing how goods and money markets balance. He also helped develop the compensation test (Kaldor-Hicks efficiency) to judge whether an economic policy makes society better off by checking if winners could theoretically pay off losers. This work expanded general equilibrium theory (how all markets fit together) and introduced the 'Hicksian demand function' to explain consumer choices.