The Accounting Historians Journal Vol. 9, No. 1 Spring 1982
Richard P. Brief NEW YORK UNIVERSITY
HICKS ON ACCOUNTING
Abstract: Whenever income and capital maintenance concepts are discussed at the conceptual level, a reference to Hicks is likely to be found. These references are misleading since Hicks himself believed that the proper basis of valuation in the financial statements of a firm is historical cost. He also argued that accountants should not make price-level adjustments. Hicks' views on accounting, which are scattered in his writings over a period of 35 years, are reviewed in this paper.
J. R. Hicks viewed accounting from a statistician's perspective and he emphasized the need for objective accounting data. Hicks also was concerned with the principles of account classification which he once called "the canons of orderliness."1 The need for objectivity and order, together with a very strict interpretation of how accounts should be framed to monitor management, led this 1972 Nobel Prize economist to defend the practice of valuing assets at historical cost and to argue, as a corollary, that accountants should not make price-level adjustments.
This short description of Hicks on accounting differs sharply from the popular view. The misconception is due to the pervasive in-fluence on accounting thought of Hicks' definition of a man's income as "the maximum value which he can consume during a week, and still expect to be as well off at the end of the week as he was at the beginning."2 This income concept was introduced into accounting literature by Alexander in 1950 and, by the early 1960s, Zeff re-ported that the definition "recurs with remarkable frequency in economic and (especially) accounting writings."3 Today, whenever the income concept is discussed at a conceptual level, a reference to Hicks is likely to be found.
Hicks himself warned that income and related concepts are "bad tools, which break in your hands."4 However, with few exceptions, most theorists have not only ignored this admonition, but they also have overlooked other work by Hicks which is more directly related to accounting practice.
Hicks' interest in accounting was signalled in 1942 with the publi-cation of The Social Framework. This book is a text on "Social