Knight, Frank H.

Frank Hyneman Knight (November 7, 1885 - April 15, 1972) was an important economist in the first half of the 20th century. A founder of the Chicago school, he authored the book Risk Uncertainty and Profit, based on his Ph.D. dissertation at Cornell University where he argued that perfect competition would not eliminate profits due to uncertainty.

Knight invented the notion of what has come to be called Knightian uncertainty, where he made a distinction between "risk" and uncertainty. He argued that situations with risk were those where decision making was made faced with unknown outcomes but known ex-ante probability distributions. He argued that these situations, where decision making rules such as maximising expected utility can be applied, differ in a deep way from those where the probability distribution of a random outcome is unknown. While most economists today would recognise the difference between the two situations, there has been little progress in terms of writing models and doing empirical tests of problems with Knightian uncertainty. A possible exception is the "Markets from Networks" model developed by sociologist Harrison White in 2002.

He entered a famous debate with A.C. Pigou over social costs. He also made contributions to the arguments about toll roads. He said that rather than congestion justifying government tolling of roads, privately owned roads would set tolls to reduce congestion to its efficient level. In particular, he developed the argument that forms the basis of analysis of traffic equilibrium, and has since become known as Wardrop's Principle:

Suppose that between two points there are two highways, one of which is broad enough to accommodate without crowding all the traffic which may care to use it, but is poorly graded and surfaced; while the other is a much better road, but narrow and quite limited in capacity. If a large number of trucks operate between the two termini and are free to choose either of the two routes, they will tend to distribute themselves between the roads in such proportions that the cost per unit of transportation, or effective returns per unit of investment, will be the same for every truck on both routes. As more trucks use the narrower and better road, congestion develops, until at a certain point it becomes equally profitable to use the broader but poorer highway.

Nobel laureate Milton Friedman studied under Knight while attending the University of Chicago.

[edit] References

[edit] Major publications

• "The Concept of Normal Price in Value and Distribution", 1917, QJE.
• Risk, Uncertainty and Profit (pdf), 1921, ISBN 978-0984061426.
• "Cost of Production and Price Over Long and Short Periods", 1921, JPE.
• "Cassel's Theoretische Sozialökonomie", 1921, JPE.
• "Ethics and the Economic Interpretation", 1922, QJE (repr. in 1999, I)
• "The Ethics of Competition", 1923, QJE (repr. in 1999, I)
• "Some Fallacies in the Interpretation of Social Cost", 1924, QJE (repr. in 1999, I)
• "The Limitations of Scientific Method in Economics", 1924, in Tugwell, editor, Trend of Economics (repr. in 1999, I)
• "Fact and Metaphysics in Economic Psychology", 1925, AER (repr. in 1999, I)
• "A Note on Professor Clark's Illustration of Marginal Productivity", 1925, JPE.
• "Economic Psychology and the Value Problem", 1925, QJE.
• "Economics at its Best: Review of Pigou", 1926, AER.
• "Historical and Theoretical Issues in the Problem of Modern Capitalism", 1928, Journal of Econ & Business History (repr. in 1956 & 1999, I)
• "A Suggestion for Simplifying the Statement of the General Theory of Price", 1928, JPE.
• "Freedom as Fact and Criterion", 1929, Int J of Ethics
• "Statics and Dynamics: Some queries regarding the mechanical analogy in economics", 1930, ZfN (repr. in 1956 & 1999, I)
• "Professor Fisher's Interest Theory: A case in point", 1931, JPE.
• "Modern Economic Society Further Considered", 1932, JPE.
• "The Newer Economics and the Control of Economic Activity", 1932, JPE (repr. in 1999, I)
• The Economic Organization, 1933.
• "Capitalistic Production, Time and the Rate of Return", 1933, in Essays in Honor of Gustav Cassel (repr. in 1999, I)
• "The Nature of Economic Science in Some Recent Discussion", 1934, AER.
• "Social Science and the Political Trend", 1934, Univ of Toronto Quarterly
• "Common-Sense of Political Economy: Wicksteed Reprinted", 1934, JPE (repr. in 1956)
• The Ethics of Competition and Other Essays, 1935.
• "The Ricardian Theory of Production and Distribution", 1935, Canadian JE (repr. in 1956 & 1999, I)
• "A Comment on Machlup", 1935, JPE.
• "Professor Hayek and the Theory of Investment", 1935, EJ.
• "The Theory of Investment Once More: Mr. Boulding and the Austrians", 1935, QJE.
• "Some Issues in the Economics of Stationary States", 1936, AER.
• "The Place of Marginal Economics in a Collectivist System", 1936, AER.
• "The Quantity of Capital and the Rate of Interest", 1936, JPE (repr. in 1999, I)
• "Pragmatism and Social Action: Review of Dewey", 1936, Int J of Ethics
• "Note on Dr. Lange's Interest Theory", 1937, RES.
• "Unemployment: and Mr. Keynes's revolution in economic theory", 1937, Canadian JE (repr. in 1999, I)
• "On the Theory of Capital: In reply to Mr. Kaldor", 1938, Econometrica.
• "Bertrand Russell on Power", 1939, Ethics.
• "The Ethics of Liberalism", 1939, Economica.
• "Socialism: The Nature of the Problem", 1940, Ethics (repr. in 1999, II)
• "'What is Truth' in Economics", 1940, JPE (repr. in 1956 & 1999, I)
• "The Significance and Basic Postulates of Economics: a rejoinder", 1941, JPE
• "Religion and Ethics in Modern Civilization", 1941, J of Liberal Religion
• "The Meaning of Democracy: its politico-economic structure and ideals", 1941, J of Negro Education
• "Social Science", 1941, Ethics (repr. in 1956)
• "The Business Cycle, Interest and Money: A methodological approach", 1941, REStat (repr. in 1956 & 1999, II)
• "Professor Mises and the Theory of Capital", 1941, Economica.
• "The Role of the Individual in the Economic World of the Future", 1941, JPE.
• "Science, Philosophy and Social Procedure", 1942, Ethics
• "Fact and Value in Social Science", 1942, in Anshen, editor, Science and Man
• "Some Notes on the Economic Interpretation of History", 1942, Studies in the History of Culture (repr. in 1999, II)
• "Social Causation", 1943, American Journal of Sociology (repr. in 1956)
• "Diminishing Returns Under Investment", 1944, JPE.
• "Realism and Relevance in the Theory of Demand", 1944, JPE (repr. in 1999, II)
• "The Rights of Man and Natural Law", 1944, Ethics (repr. in 1999, II)
• "Human Nature and World Democracy", 1944, American J of Sociology.
• "Economics, Political Science and Education", 1944, AER
• The Economic Order and Religion, with T.W. Merriam, 1945.
• "Immutable Law in Economics: Its reality and limitations", 1946, AER.
• "The Sickness of Liberal Society", 1946, Ethics (repr. in 1999, II)
• "Salvation by Science: The gospel according to Professor Lundberg", 1947, JPE (repr. in 1956)
• Freedom and Reform: Essays in economics and social philosophy, 1947.
• "Free Society: Its basic nature and problem", 1948, Philosophical Review (repr. in 1956)
• "The Role of Principles in Economics and Politics", 1951, AER (repr. in 1956 & 1999, II)
• "Institutionalism and Empiricism in Economics", 1952, AER.
• On the History and Methods of Economics: Selected essays, 1956, ISBN 978-0-226-44689-9.
• Intelligence and Democratic Action, 1960.
• "Methodology in Economics", 1961, Southern EJ
• "Abstract Economics as Absolute Ethics", 1966, Ethics.
• "Laissez Faire: Pro and con", 1967, JPE (repr. in 1999, II)
• "The Case for Communism: From the Standpoint of an Ex-liberal." (published posthumously) in Research in the History of Economic Thought and Methodology, edited by Warren J. Samuels, archival supplement 2 (1991): 57–108.
• Selected Essays by Frank H. Knight, Volume 1: "What is Truth" in Economics?, (ed. by Ross B. Emmett), 1999, ISBN 978-0-226-44695-0
• Selected Essays by Frank H. Knight, Volume 2: Laissez Faire: Pro and Con, (ed. by Ross B. Emmett), 1999, ISBN 978-0-226-44697-4

[edit] Sources

• Burgin, Angus, “The Radical Conservatism of Frank H. Knight,” Modern Intellectual History, 6 (Nov. 2009), 513–38.
• Emmett, Ross B. "Introduction", in Selected Essays by Frank H. Knight, 2 vols., (ed. by Ross Emmett), 1999.
• Emmett, Ross B. "Did the Chicago School Reject Frank Knight?", in Frank Knight and the Chicago School in American Economics, 2009, ISBN 978-0-415-77500-7
• Fonseca, Gonçalo L. "Frank H. Knight, 1885–1972". The History of Economic Thought Website. The New School for Social Research. http://cepa.newschool.edu/het/profiles/knight.htm. Retrieved 2008-05-07. 
• Kasper, Sherryl. The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers (2002), ch 2
• White, Harrison C., Markets from Networks: Socioeconomic Models of Production, Princeton, NJ: Princeton University Press (2002).

[edit] External links

Wikisource has original works written by or about: Frank Knight

• The Frank H. Knight Page
• Concise Encyclopedia of Economics: Frank Hyneman Knight