Knight, Frank Hyneman

From New World Encyclopedia
(Started)
m
(21 intermediate revisions by 7 users not shown)
Line 1: Line 1:
−
[[Category:Politics and social sciences]]
+
[[Category:Economists]]
−
[[Category:Economics]]
 
−
[[Category:Biography]]
 
−
{{Claimed}}{{Started}}
 
−
{{epname}}
 
  
−
'''Frank Hyneman Knight''' (November 7, 1885 - April 15, 1972) was an important [[economist]] in the first half of the [[twentieth century]]. He was born in MacLean County, [[Illinois]] in a devoutly Christian family of farmers. He never completed high school but was admitted in 1905 to the American University in [[Tennessee]]. He graduated in 1911 from [[Milligan College]]. At the [[University of Tennessee]] he obtained a B.S. and an M.A. (the latter in German) in 1913. He then moved to [[Cornell University]] for doctoral studies. His initial main subject was philosophy, but he soon switched to economics. He studied with [[Alvin Johnson]] and [[Allyn Young]], who both supervised the work on his dissertation, that was completed in 1916 under the title ''Cost, Value and Profit''. Knight would subsequently revise it for publication under its more familiar name ''[http://www.econlib.org/library/Knight/knRUP.html Risk, Uncertainty and Profit]''(1921).
+
{{Submitted}}{{Images OK}}{{Approved}}{{Paid}}{{Copyedited}}
 +
{{epname|Knight, Frank Hyneman}}
  
−
==Academic career==
+
'''Frank Hyneman Knight''' (November 7, 1885 - April 15, 1972) was an [[United States|American]] [[economics|economist]]. He remains famous for his "Knightian uncertainty," the distinction between [[risk]] and uncertainty, and for his work on [[ethics]] in economics. Knight was the central figure in the development of the "[[Chicago School of Economics]]," and the teacher of [[Nobel Prize]] winners in economics [[Milton Friedman]], [[George Stigler]], and [[James M. Buchanan]]. An eclectic thinker, Knight contributed significantly to the development of American economic thought in the twentieth century, and thus, directly or indirectly, was influential in determining the course of prosperity in human [[society]].
 +
{{toc}}
 +
==Life==
  
−
The "Grand Old Man" of Chicago, Frank H. Knight was one of the century's most eclectic economists and perhaps the deepest thinker and scholar American economics has produced.  Jointly with [[Jacob Viner]], Knight presided over the Department of Economics at the [[University of Chicago]] from the 1920s to the late 1940s, and played a central role in setting the character of that department that was perhaps only comparable to [[Schumpeter]]'s tenure over [[Harvard]] or [[Lionel Robbins|Robbins]]'s at the [[London School of Economics|L.S.E]].
+
'''Frank Hyneman Knight''' was born on November 7, 1885 in MacLean County, [[Illinois]] into a family of devoutly [[Christianity|Christian]] farmers. He never completed [[high school]] but was admitted in 1905 to the American University in [[Tennessee]]. He graduated in 1911 from the Milligan College. At the [[University of Tennessee]], he obtained a B.S. and an M.A. (the latter in [[German language|German]]) in 1913. He then moved to [[Cornell University]] for doctoral studies. His initial subject of interest was [[philosophy]], but he soon switched to [[economics]]. He studied with [[Alvin Johnson]] and [[Allyn Young]], who both supervised the work on his dissertation, which was completed in 1916 under the title ''Cost, Value and Profit'' (later renamed into ''Risk, Uncertainty and Profit'' and published in 1921).
  
−
His famous dissertation ''[http://www.econlib.org/library/Knight/knRUP.html Risk, Uncertainty and Profit]''(1921) remains one of the most interesting reads in economics even today. In it, Knight made his famous distinction between "risk" (randomness with knowable probabilities) and "uncertainty" (randomness with unknowable probabilities), set forth the role of the entrepreneur in a distinctive theory of profit and gave one of the earliest presentations of the the now-famous law of variable proportions in the theory of production.  
+
Knight first taught at the [[University of Iowa]] from 1919 to 1927, after which he transferred to the [[University of Chicago]], where he served as Professor of Economics from 1927 until 1955, and as emeritus professor until his death. Under his presidency, the Department of Economics at the University of Chicago grew to become one of the dominant schools of economic thought in the [[United States]].  
  
−
While irreducibly [[Neoclassical economics|Neoclassical]] in a general sense, Knight's peculiar economics were a direct inheritance of his Cornell professor, [[Herbert J. Davenport]] and what was then called the "American Psychological School" which sought to ground the Marginalist high theory of [[Jevons]], [[Philip Wicksteed|Wicksteed]] and the [[Austrian school|Austrians]] in the relativist foundations of [[Thorstein Veblen]]'s methodology.  
+
Knight died on April 15, 1972 in [[Chicago]], [[Illinois]].
  
−
Like Davenport, the notoriously belligerent Knight criticized other schools on several accounts while also adopting some of their ideas: for instance, from the [[Lausanne school|Walrasians]] he adopted the idea of theoretical rigor and viewing the economy in terms of multiple markets, but disparaged their mathematical propensities; from the Austrians he adopted their theory of alternative cost, but attacked their theory of capital; from the [[Alfred Marshall|Marshallians]] he adopted their literary tone, but attacked their lack of rigor and their "real" theory of cost; from the [[David Ricardo|Ricardians]], he adopted a concern with the interaction between social structure and theory but attacked the objectivist basis of their theory; from the [[Marxian economics|Marxians]], he adopted many of their ideas about the ethical critique of capitalism as well as its tendency towards the concentration of capital, but he abhorred the [[labor theory of value]]; from the [[Institutional economics|Institutionalists]], he adopted their concern with social impact on behavior and evolution, but he opposed their empirical techniques and conclusions ("history is to be sensed, not plotted," as Knight put it). 
+
==Work==
  
−
The famously opinionated Knight used his numerous book reviews in Chicago's ''Journal of Political Economy'' as a vehicle for his thoughts on many subjects. As a result, he was embroiled in many debates with the most prominent economists of his day ranging over capital theory (versus [[Hayek]], [[Mises]] and the Austrians, e.g. 1933, 1935, 1937),  welfare theory (versus [[Pigou]], e.g. 1924),  [[John Maynard Keynes|Keynesian]] theory (1937) and positivist methodology (versus [[Terence W. Hutchison|Hutchison]] (1940)).  
+
Knight’s famous dissertation ''Risk, Uncertainty and Profit'' from 1921 remains one of the most interesting reads in [[economics]] even today. Knight made his famous distinction between "[[risk]]" (randomness with knowable [[probability|probabilities]]) and "uncertainty" (randomness with unknowable probabilities) and set forth the role of the [[entrepreneur]] in a distinctive theory of [[profit]].
 +
<blockquote>Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated...The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating...It will appear that a measurable uncertainty, or "risk" proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all (Knight 1921).  
 +
</blockquote>
  
−
Thus, Knight amalgamated much of what was contained all over the spectrum of economic theory - but without once losing the skeptic's dissecting eye. Perhaps because he was endowed with enough of the demeanour and knowledge of a philosopher, sociologist and historian as well as an economist, he was able to appear as a kindred spirit to all schools as well as an opponent at the same time.  
+
He argued that situations with risk were those where decision making was made faced with unknown outcomes but known probability distributions. He argued that these situations, where decision making rules such as maximizing 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 now recognize 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," with the exception of the "Markets from Networks" model developed by [[sociology|sociologist]] [[Harrison White]] in 2002.
  
−
As noted, Knight was one of the leaders of the inter-war  "Chicago School" (although we must keep in mind that during his stay there, the [[Chicago School]] had a much different tone than it acquired later).   Yet, even then, he managed to remain an outsider in his own kingdom. Knight's well-known dislike of quantitative methods and especially empirical techniques brought him into conflict with several colleagues - notably, [[Henry Schultz]], [[Paul Douglas]] and [[Oskar Lange]]. His opposition to the Marshallian propensities of his co-giant, [[Jacob Viner]], earned him the latter's respect but not necessarily his  friendship. Even Knight's own unlikely protegé [[Henry Simons]], differed substantially from Knight on most matters.
+
Knight also made a contribution to the debate over toll roads. He said that rather than congestion justifying government tolling of roads as argued by [[Arthur Cecil Pigou|Pigou]], privately owned roads would set tolls to reduce congestion to its efficient level. In particular, he developed a simple behavioral principle to describe the spreading of trips over alternate routes due to congested conditions. Knight's concept has since become known as [[Wardrop's Principle]] and forms the basis of the analysis of traffic equilibrium.  
  
−
Like [[Schumpeter]] (whom he both admired and resembled in many ways), Knight was an avid proponent of a cosmopolitan laissez-faire — but he did so on unique, "non-consequentialist" grounds. As is evident in his famous ''Ethics of Competition'' (1923) and in other works on ethics throughout his life, Knight does not regard the capitalist system as ethically defensible. Capitalism, he claims, does not produce what people want but merely creates the wants for what it produces - "the freest individual...is in large measure a product of the economic environment that has formed his desires and needs, given him whatever marketable productive capacities he has, and which largely controls his opportunities." (Knight, 1923). Furthermore, he argued that there was a tendency in market systems towards [[monopoly]], that the "efficiency" of markets was misleading for there was no sense of "usefulness" of its output to society, that the [[marginal productivity|marginal productivity thesis]] had erroneous ethical implications as "the income does not go to "factors" but to their owners...and ownership of personal or material productive capacity is based upon a complex mixture of inheritance, luck and effort, probably in that order of relative importance" (Knight, 1923).  
+
While irreducibly [[Neoclassical economics|Neoclassical]] in a general sense, Knight's peculiar economics were a direct inheritance of his [[Cornell University|Cornell]] professor, [[Herbert J. Davenport]] and what was then called the "American Psychological School" which sought to ground the Marginalist high theory of [[William Stanley Jevons|Jevons]], [[Philip Wicksteed|Wicksteed]] and the [[Austrian school|Austrians]] in the relativist foundations of [[Thorstein Veblen]]'s methodology.  
  
−
Knight's peculiar ethical assault on the market system and "apologetic economics" did not diminish his penchant for laissez-faire as a policy conclusion. The economy, he argued, is a very complex and unstable thing. Programs of government intervention are too simplistic and do not take into account the complexities of a market economy - thus making interventionism even more dangerous. Laissez-faire is recommended, he argued, not because it "works" (for it patently does not) but rather because it holds individual freedom as a absolute good and the alternative may be much worse.   
+
Knight criticized other schools on several accounts while also adopting some of their ideas. For instance, from the [[Leon Walras|Walrasians]] he adopted the idea of theoretical rigor and viewing the [[economy]] in terms of multiple [[market]]s, but disparaged their [[mathematics|mathematical]] propensities. From the [[Austria]]ns, he adopted their theory of alternative [[cost]], but attacked their theory of [[capital]]. From the [[Alfred Marshall|Marshallians]], he adopted their literary tone, but attacked their lack of rigor and their "real" theory of cost. From the [[David Ricardo|Ricardians]], he adopted a concern with the interaction between [[social structure]] and theory but attacked the objectivist basis of their theory. From the [[Marxism|Marxians]], he adopted many of their ideas about the ethical critique of capitalism as well as its tendency towards the concentration of capital, but he abhorred the [[labor theory of value]]. From the [[Institutional economics|Institutionalists]], he adopted their concern with social impact on behavior and evolution, but he opposed their empirical techniques and conclusions ("history is to be sensed, not plotted," as Knight put it).   
  
−
As a result, Knight's position is quite the reverse of the Second Chicago School economists of the 1960s, (i.e. [[ Milton Friedman|Friedman]], [[ George Stigler|Stigler]] and company). The Second Chicago School tended to argue the positivist line that  laissez-faire is desirable because it delivers the goods, and not because it is a good in itself.  Indeed, throughout his life, Knight explicitly deplored and attacked many of the assumptions that the Second Chicago School held dear: e.g. the denial of the importance of monopolistic competition, the assumption of consumer sovereignty, stable preferences, efficient outcomes of markets, empirical-intuitive reasoning, interdisciplinary imperialism, etc.  
+
Knight was one of the leaders of the "Chicago School" (although his Chicago School was much different from what it later became). However, his dislike of quantitative methods and empirical techniques brought him into conflict with several colleagues. His opposition to the Marshallian views of [[Jacob Viner]] earned him the latter's respect but not necessarily his friendship. Even [[Henry Simons]], Knight's student, differed substantially from Knight on most matters.
  
−
All these items are precisely and directly opposed to virtually every important argument and position of Knight's. Indeed, the later Chicago School's declared "positivist" methodology was wryly characterized by Knight as "the emotional pronouncement of value judgements condemning emotion and value judgements which seems to [me] a symptom of a defective sense of humor" (Knight, 1940).  However, we must grant that Knight's theories of capital (Knight viewed all factors as capital to a greater or lesser degree) and his "[[public choice]]" view of political behavior could be said to have persisted in at least some quarters of the modern Chicago School.
+
Like [[Joseph Schumpeter]] (whom he both admired and resembled in many ways), Knight was an avid proponent of a cosmopolitan [[laissez-faire]]. As is evident in his famous ''Ethics of Competition'' (1923) and in other works on [[ethics]] throughout his life, Knight did not regard the [[capitalism|capitalist]] system as ethically defensible. He argued that there was a tendency in market systems towards [[monopoly]], and that the "efficiency" of markets was misleading for there was no sense of "usefulness" of its output to society. Capitalism, he claimed, does not produce what people want but merely creates the wants for what it produces:
 +
<blockquote>the freest individual...is in large measure a product of the economic environment that has formed his desires and needs, given him whatever marketable productive capacities he has, and which largely controls his opportunities (Knight 1923). </blockquote>
  
−
In this sense, then, Knight, like Schumpeter, carved a unique path in economics — being claimed by many schools of thought as one of their own, without really belonging to any. Unfortunately, also like Schumpeter, although he educated and influenced many students, Knight failed to acquire any followers and failed to build up a distinctive "school of thought" around himself.   We can see some traces of his persective in the work of [[Kenneth E. Boulding]], [[Martin Bronfenbrenner]], [[James M. Buchanan]] and [[George J. Stigler]], but they can hardly be called "Knightians" in any meaningful sense.
+
However, these attacks on capitalism did not cause him to reject laissez-faire as the best option. The economy, he argued, was very complex and unstable. Government intervention did not take into account the complexities of a market economy, making interventionism dangerous. Thus, he concluded that laissez-faire is recommended, not because it "works," but rather because it holds individual freedom as an absolute good and that the alternative may be much worse.  
  
−
Nobel laureate [[Milton Friedman]] was one of Knight's many students at the [[University of Chicago]].
+
As a result, Knight's position opposite to the Second Chicago School economists of the 1960s, including [[Milton Friedman|Friedman]] and [[George Stigler|Stigler]]. They tended to argue the positivist line that laissez-faire is desirable because it works, and not because it is a good in itself.
  
−
==Some contributions==
+
==Legacy==
  
−
Knight invented the notion of what has come to be called [[Knightian uncertainty]], where he made a distinction
+
Frank Hyneman Knight was one of the twentieth century's most eclectic [[economics|economists]] and one of the deepest thinkers American economics has produced. Jointly with [[Jacob Viner]], Knight presided over the Department of Economics at the [[University of Chicago]] from the 1920s to the late 1940s, playing a central role in setting the character of that department.
−
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 cost]]s.  He also made contributions to the arguments about [[toll road]]s. 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]]:
+
Knight carved his own unique path in economics, claimed by many schools of thought as one of their own, without really belonging to any. Unfortunately though, although he educated and influenced many students, he acquired no followers and thus failed to build up his own distinctive school of thought. 
  
−
:''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 laureates [[Milton Friedman]], [[James M. Buchanan]], and [[George J. Stigler]], were Knight's students at the [[University of Chicago]], although their ideas differed in many respects from those of Knight.
  
 +
==Publications==
  
 +
*Knight, Frank H. 1921. "Cost of production and price over long and short periods" in ''Journal of Political Economy, 29''. (4), 304-335.
 +
*Knight, Frank H. [1921] 2006. ''Risk, uncertainty and profit''. Cosmo Classics. ISBN 1602060053
 +
*Knight, Frank H. [1923] 1997. ''The ethics of competition and other essays''. Transaction Publishers. ISBN 1560009551
 +
*Knight, Frank H. 1924. "The limitations of scientific method in economics" in ''Trend of Economics''. A.A. Knopf.
 +
*Knight, Frank H. 1933. ''The economic organisation with an article: Notes on utility and cost''. New York: Harper and Row.
 +
*Knight, Frank H. 1935. ''Economic theory and nationalism''. London: Allen & Unwin.
 +
*Knight, Frank H. 1936. ''The quantity of capital and the rate of interest''. Chicago: University of Chicago Press.
 +
*Knight, Frank H. 1942. "Fact and value in social science" in ''Science and Man''. Harcourt, Brace and Company.
 +
*Knight, Frank H. [1947] 1982. ''Freedom and Reform: Essays in economics and social philosophy''. Liberty Fund. ISBN 086597005X
 +
*Knight, Frank H. 1956. ''On the history and methods of economics: Selected essays''. University of Chicago Press. ISBN 0226446891
 +
*Knight, Frank H. 1960. ''Intelligence and democratic action''. Harvard University Press.
 +
*Knight, Frank H. 1991. "The case for Communism: From the standpoint of an ex-liberal" in ''Research in the History of Economic Thought and Methodology''. JAI Press. ISBN 1559382457
 +
*Knight, Frank H., and T.W. Merriam. [1945] 1979. ''The economic order and religion''. Greenwood Press. ISBN 0313209707
  
−
==Major publications==
+
==References==
−
*"The Concept of Normal Price in Value and Distribution," 1917, ''QJE''.
 
−
*''[http://www.econlib.org/library/Knight/knRUP.html Risk, Uncertainty and Profit]'', 1921.
 
−
*"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 Organisation'', 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 Competitition 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''.
 
−
*"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.
 
−
*''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'', 2 vols., (ed. by Ross Emmett), 1999.
+
*Bookrags.com. [http://www.bookrags.com/biography/frank-hyneman-knight/ ''Frank Hyneman Knight'']. Bookrags, 2006. Retrieved on April 18, 2007.
−
 
+
*Emmett, Ross. 2007. "Introduction" in ''Selected Essays by Frank H. Knight''. (2 vols.). University of Chicago Press. ISBN 0226446964
−
==References==
+
*Kasper, Sherryl. 2003. ''The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers''. Edward Elgar Publishing. ISBN 1840646063
−
* Emmett, Ross. "Introduction," in ''Selected Essays by Frank H. Knight'', 2 vols., (ed. by Ross Emmett), 1999.
+
*White, Harrison C. 2004. ''Markets from Networks: Socioeconomic Models of Production''. Princeton, NJ: Princeton University Press. ISBN 0691120382
−
* 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).
 
  
 
==External links==
 
==External links==
−
* [http://www.msu.edu/~emmettr/fhk/ The Frank H. Knight Page]
+
All links retrieved April 26, 2017.
−
* [http://www.econlib.org/library/Enc/bios/Knight.html Concise Encyclopedia of Economics: Frank Hyneman Knight]
 
−
* [http://cepa.newschool.edu/het/profiles/knight.htm Profile of Frank Knight] at the [http://cepa.newschool.edu/het/home.htm History of Economic Thought website].
 
−
 
 
−
 
 
  
 +
* [http://www.msu.edu/~emmettr/fhk/ Frank H. Knight Page] – Knight’s page on Minnesota State University website.
 +
* [http://www.econlib.org/library/Enc/bios/Knight.html Frank Hyneman Knight] – Biography in the Concise Encyclopedia of Economics.
 +
* [http://www.econlib.org/library/Knight/knRUP.html ''Risk, Uncertainty and Profit''] – Full-text work by Knight (1921).
  
−
+
{{Chicago school economists}}
 
{{Credits|Frank_Knight|118042844|}}
 
{{Credits|Frank_Knight|118042844|}}

Revision as of 15:20, 26 April 2017


Frank Hyneman Knight (November 7, 1885 - April 15, 1972) was an American economist. He remains famous for his "Knightian uncertainty," the distinction between risk and uncertainty, and for his work on ethics in economics. Knight was the central figure in the development of the "Chicago School of Economics," and the teacher of Nobel Prize winners in economics Milton Friedman, George Stigler, and James M. Buchanan. An eclectic thinker, Knight contributed significantly to the development of American economic thought in the twentieth century, and thus, directly or indirectly, was influential in determining the course of prosperity in human society.

Life

Frank Hyneman Knight was born on November 7, 1885 in MacLean County, Illinois into a family of devoutly Christian farmers. He never completed high school but was admitted in 1905 to the American University in Tennessee. He graduated in 1911 from the Milligan College. At the University of Tennessee, he obtained a B.S. and an M.A. (the latter in German) in 1913. He then moved to Cornell University for doctoral studies. His initial subject of interest was philosophy, but he soon switched to economics. He studied with Alvin Johnson and Allyn Young, who both supervised the work on his dissertation, which was completed in 1916 under the title Cost, Value and Profit (later renamed into Risk, Uncertainty and Profit and published in 1921).

Knight first taught at the University of Iowa from 1919 to 1927, after which he transferred to the University of Chicago, where he served as Professor of Economics from 1927 until 1955, and as emeritus professor until his death. Under his presidency, the Department of Economics at the University of Chicago grew to become one of the dominant schools of economic thought in the United States.

Knight died on April 15, 1972 in Chicago, Illinois.

Work

Knight’s famous dissertation Risk, Uncertainty and Profit from 1921 remains one of the most interesting reads in economics even today. Knight made his famous distinction between "risk" (randomness with knowable probabilities) and "uncertainty" (randomness with unknowable probabilities) and set forth the role of the entrepreneur in a distinctive theory of profit.

Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated...The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating...It will appear that a measurable uncertainty, or "risk" proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all (Knight 1921).

He argued that situations with risk were those where decision making was made faced with unknown outcomes but known probability distributions. He argued that these situations, where decision making rules such as maximizing 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 now recognize 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," with the exception of the "Markets from Networks" model developed by sociologist Harrison White in 2002.

Knight also made a contribution to the debate over toll roads. He said that rather than congestion justifying government tolling of roads as argued by Pigou, privately owned roads would set tolls to reduce congestion to its efficient level. In particular, he developed a simple behavioral principle to describe the spreading of trips over alternate routes due to congested conditions. Knight's concept has since become known as Wardrop's Principle and forms the basis of the analysis of traffic equilibrium.

While irreducibly Neoclassical in a general sense, Knight's peculiar economics were a direct inheritance of his Cornell professor, Herbert J. Davenport and what was then called the "American Psychological School" which sought to ground the Marginalist high theory of Jevons, Wicksteed and the Austrians in the relativist foundations of Thorstein Veblen's methodology.

Knight criticized other schools on several accounts while also adopting some of their ideas. For instance, from the Walrasians he adopted the idea of theoretical rigor and viewing the economy in terms of multiple markets, but disparaged their mathematical propensities. From the Austrians, he adopted their theory of alternative cost, but attacked their theory of capital. From the Marshallians, he adopted their literary tone, but attacked their lack of rigor and their "real" theory of cost. From the Ricardians, he adopted a concern with the interaction between social structure and theory but attacked the objectivist basis of their theory. From the Marxians, he adopted many of their ideas about the ethical critique of capitalism as well as its tendency towards the concentration of capital, but he abhorred the labor theory of value. From the Institutionalists, he adopted their concern with social impact on behavior and evolution, but he opposed their empirical techniques and conclusions ("history is to be sensed, not plotted," as Knight put it).

Knight was one of the leaders of the "Chicago School" (although his Chicago School was much different from what it later became). However, his dislike of quantitative methods and empirical techniques brought him into conflict with several colleagues. His opposition to the Marshallian views of Jacob Viner earned him the latter's respect but not necessarily his friendship. Even Henry Simons, Knight's student, differed substantially from Knight on most matters.

Like Joseph Schumpeter (whom he both admired and resembled in many ways), Knight was an avid proponent of a cosmopolitan laissez-faire. As is evident in his famous Ethics of Competition (1923) and in other works on ethics throughout his life, Knight did not regard the capitalist system as ethically defensible. He argued that there was a tendency in market systems towards monopoly, and that the "efficiency" of markets was misleading for there was no sense of "usefulness" of its output to society. Capitalism, he claimed, does not produce what people want but merely creates the wants for what it produces:

the freest individual...is in large measure a product of the economic environment that has formed his desires and needs, given him whatever marketable productive capacities he has, and which largely controls his opportunities (Knight 1923).

However, these attacks on capitalism did not cause him to reject laissez-faire as the best option. The economy, he argued, was very complex and unstable. Government intervention did not take into account the complexities of a market economy, making interventionism dangerous. Thus, he concluded that laissez-faire is recommended, not because it "works," but rather because it holds individual freedom as an absolute good and that the alternative may be much worse.

As a result, Knight's position opposite to the Second Chicago School economists of the 1960s, including Friedman and Stigler. They tended to argue the positivist line that laissez-faire is desirable because it works, and not because it is a good in itself.

Legacy

Frank Hyneman Knight was one of the twentieth century's most eclectic economists and one of the deepest thinkers American economics has produced. Jointly with Jacob Viner, Knight presided over the Department of Economics at the University of Chicago from the 1920s to the late 1940s, playing a central role in setting the character of that department.

Knight carved his own unique path in economics, claimed by many schools of thought as one of their own, without really belonging to any. Unfortunately though, although he educated and influenced many students, he acquired no followers and thus failed to build up his own distinctive school of thought.

Nobel laureates Milton Friedman, James M. Buchanan, and George J. Stigler, were Knight's students at the University of Chicago, although their ideas differed in many respects from those of Knight.

Publications

  • Knight, Frank H. 1921. "Cost of production and price over long and short periods" in Journal of Political Economy, 29. (4), 304-335.
  • Knight, Frank H. [1921] 2006. Risk, uncertainty and profit. Cosmo Classics. ISBN 1602060053
  • Knight, Frank H. [1923] 1997. The ethics of competition and other essays. Transaction Publishers. ISBN 1560009551
  • Knight, Frank H. 1924. "The limitations of scientific method in economics" in Trend of Economics. A.A. Knopf.
  • Knight, Frank H. 1933. The economic organisation with an article: Notes on utility and cost. New York: Harper and Row.
  • Knight, Frank H. 1935. Economic theory and nationalism. London: Allen & Unwin.
  • Knight, Frank H. 1936. The quantity of capital and the rate of interest. Chicago: University of Chicago Press.
  • Knight, Frank H. 1942. "Fact and value in social science" in Science and Man. Harcourt, Brace and Company.
  • Knight, Frank H. [1947] 1982. Freedom and Reform: Essays in economics and social philosophy. Liberty Fund. ISBN 086597005X
  • Knight, Frank H. 1956. On the history and methods of economics: Selected essays. University of Chicago Press. ISBN 0226446891
  • Knight, Frank H. 1960. Intelligence and democratic action. Harvard University Press.
  • Knight, Frank H. 1991. "The case for Communism: From the standpoint of an ex-liberal" in Research in the History of Economic Thought and Methodology. JAI Press. ISBN 1559382457
  • Knight, Frank H., and T.W. Merriam. [1945] 1979. The economic order and religion. Greenwood Press. ISBN 0313209707

References
ISBN links support NWE through referral fees

  • Bookrags.com. Frank Hyneman Knight. Bookrags, 2006. Retrieved on April 18, 2007.
  • Emmett, Ross. 2007. "Introduction" in Selected Essays by Frank H. Knight. (2 vols.). University of Chicago Press. ISBN 0226446964
  • Kasper, Sherryl. 2003. The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers. Edward Elgar Publishing. ISBN 1840646063
  • White, Harrison C. 2004. Markets from Networks: Socioeconomic Models of Production. Princeton, NJ: Princeton University Press. ISBN 0691120382

External links

All links retrieved April 26, 2017.

Chicago school economists

Frank H. Knight · Jacob Viner · Henry Calvert Simons · Theodore Schultz · Ronald Coase · George Stigler · Milton Friedman · Rose Friedman · George P. Shultz · Robert Fogel · Gary Becker · Robert Lucas, Jr. · Sherwin Rosen · Richard Posner · James Heckman · Kevin M. Murphy

Credits

New World Encyclopedia writers and editors rewrote and completed the Wikipedia article in accordance with New World Encyclopedia standards. This article abides by terms of the Creative Commons CC-by-sa 3.0 License (CC-by-sa), which may be used and disseminated with proper attribution. Credit is due under the terms of this license that can reference both the New World Encyclopedia contributors and the selfless volunteer contributors of the Wikimedia Foundation. To cite this article click here for a list of acceptable citing formats.The history of earlier contributions by wikipedians is accessible to researchers here:

The history of this article since it was imported to New World Encyclopedia:

Note: Some restrictions may apply to use of individual images which are separately licensed.

Retrieved from https://www.newworldencyclopedia.org/p/index.php?title=Frank_Hyneman_Knight&oldid=1004489

Content is available under Creative Commons Attribution/Share-Alike License; additional terms may apply. See Terms of Use for details.
Copyright Logo
Powered by MediaWiki