HICKS’S THEORY OF THE SHORT-TERM RATE OF INTEREST AND THORNTON’S AND HAWTREY’S INFLUENCES

Abstract

John Richard Hicks proposed an endogenous theory of money from the 1960s until his final book, A Market Theory of Money (1989). He developed a theory of credit and a theory of short-term rates of interest that had been neglected in his earlier writings such as “Mr. Keynes and the ‘Classics’” (1937). In that early article, Hicks concentrated on the market for cash balances and the motives for the demand for money, while leaving aside the money market and the clearing function of banks. In the 1960s, Hicks was largely inspired by Henry Thornton (1802) and Ralph George Hawtrey (1913, 1919). The originality of this paper is to interpret the short-term rates as the price of liquidity and to examine Hicks’s fight against restrictive monetary policies in the 1960s to the 1970s in Britain.