Hicks on Walrasian Equilibrium in the 1930s and Beyond

In 1973 Economica devoted its February issue to celebrating Sir John Hicks. On that occasion, Hicks’s famous monograph Value and Capital (1939) was hailed as “the book that transformed economic theory” (p. 1). Nowadays Value and Capital (henceforth VC) is viewed as the starting point of the so-called neo-Walrasian research programme. From at least the 1970s Hicks himself endorsed that qualification and recognized his own Walrasian affiliation at the time when he was writing VC (1983b, p. 85). Yet, on re-reading VC, such parentage does not stand out so clearly. VC is subdivided into four parts, the first two devoted to ‘statics’ and the last two to ‘dynamics’. One should expect that, at least in the ‘static’ parts of VC, Walras should be at the centre of the stage; but this is not really so. It is true that, soon after the beginning of Part II – General Equilibrium, Hicks (1939, p. 61) declares: “I shall follow Walrasian methods in considerable parts of this book”. Yet, if one peruses the one hundred and ten pages of the ‘static’ parts, one immediately realizes that the pride of place goes to Marshall and Pareto; Walras is hardly mentioned, except when it is strictly necessary. And even when his name is mentioned, as it happens at the pages 57-61, where Hicks evokes the allegedly Walrasian equation-counting method for ‘proving’ equilibrium existence and alludes to Walras’ Law, the reference is far from favourable: at p. 61, in particular, the “Walrasian system” is blamed for its “sterility”, which is ascribed to the fact that “Walras did not go on to work out the laws of change for his system of General Equilibrium.” If one then moves to the ‘dynamic’ parts of VC, the situation is understandably even worse. In the two fundamental chapters introducing Part III, respectively called “The Method of Analysis” and “Equilibrium and Disequilibrium”, there is room for Böhm-Bawerk, J.B. Clark, Cassel, Keynes, Knight, Pigou, and Wicksell, but not for Walras or any other economist of the “Lausanne School” (this being the name occasionally used by Hicks in those years to designate Walras, Pareto and their followers). Walras is only mentioned once, together with Edgeworth, in the two-page long Note to Chapter IX on “The Formation of Prices” (1939, pp. 127-9), which is almost entirely devoted to Marshall’s theory of barter and temporary equilibrium. Further, it is at least curious that the VC model, nowadays universally regarded as the point of departure of the neo-Walrasian programme, should have been called with a name, ‘temporary equilibrium model’, that is directly drawn from Marshall’s, rather than Walras’s, conceptual system. As a matter of fact, the controversial relationship between Hicks and the Walrasian approach is not only exemplified by some passages to be found in VC, but is also instanced by the contents of almost all of Hicks’s writings in the 1930s. For instance, in his 1933 paper in German, now republished in English translation as (1980b), not only does Hicks criticize Pareto for his ambiguity about the equilibrium notion and his lack of any proper theory of capital, but he also attacks Walras for his confusion about the meaning of equilibrium, a confusion that is regarded as even more serious than Pareto’s, and, as a consequence, for his mistaken theories of capital and money (1980b, pp. 29, and 33, fn. 13). Strong criticisms are raised against Walras’s conception of equilibrium and his theory of capital also in Hicks’s 1934 Econometrica article specifically devoted to Walras; but