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Risk, Uncertainty & Profit (1921)

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Risk, Uncertainty and Profit was Knight's first book, based on his dissertation A Theory of Business Profit (Cornell University, 1916). The dissertation won second place in the Hart, Schaffner, and Marx Economics Essay contest for 1917, which brought with it publication by Houghton Mifflin. Both Allyn A. Young (Knight's dissertation supervisor) and John M. Clark (Knight's colleague at the University of Chicago from 1917-1919) advised Knight on the transition from a dissertation to a book. Neither advisor had a significant influence on the final product.

The book provided a standard statement of neoclassical economics, and was adopted as required reading at the London School of Economics when Lionel Robbins was teaching there. George Stigler has described Risk, Uncertainty and Profit as one of the two dissertations written prior to World War I which has retained importance (the other was Irving Fisher's dissertation on interest theory). It continues to be cited frequently in the economics literature today.

Of course, Risk, Uncertainty and Profit is most famous for the distinction Knight made between risk and uncertainty. Asked by his first supervisor, Alvin S. Johnson, to provide a theoretical underpinning for profit, Knight came to argue that profit existed because actual competition in a modern industrial economy differed from competition in the world of pure competition in at least one essential regard: competitors in the former faced a world of uncertainty; competitors in the latter did not. In the face of uncertainty, competitors had to become entrepreneurs: they had to use their critical judgement to decide whether to engage in business activity or not. But the uncertain world was finicky; success might not be repeated, and could not be replicated or taught. (If success in dealing with uncertainty could be replicated or taught, competitive processes would translate it into a cost -- a consultant's wage, for example -- and it would no longer require human critical judgement.)

Original Publication

Knight, Frank H. 1921. Risk, Uncertainty, and Profit. Hart, Schaffner, and Marx Prize Essays, no. 31. Boston and New York: Houghton Mifflin.


Subsequent Publication History
Knight, Frank H. 1933. Risk, Uncertainty, and Profit, with a new preface. Series of Reprints of Scarce Tracts in Economics and Political Science, no. 16. London: London School of Economics and Political Science.

Knight, Frank H. 1940 [1933]. Risk, Uncertainty, and Profit, with an additional note. Series of Reprints of Scarce Tracts in Economics and Political Science, no. 16. London: London School of Economics and Political Science.


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Knight, Frank H. 1947. Riesgo, Incertidumbre y Beneficio, with a new preface, and an introduction by Manuel de Torres. Translated by Ramon Verea. Biblioteca de ciencias economicas, politicas y sociales. Madrid: M. Aguilar. [Spanish]
Knight, Frank H. 1948 [1933]. Risk, Uncertainty, and Profit, with a new preface (English version of preface for 1947 Spanish translation). New York: Kelley & Millman.

Knight, Frank H. 1957 [1948]. Risk, Uncertainty, and Profit, with a new preface. New York: Kelley & Millman.

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Knight, Frank H. 1959. Kiken, Fukakujitsusei, oyobi Rijun, with a note for Japanese readers. Selections from Modern Economics, vol. 4. Translated by Eiki Okuzumi. Tokyo: Bungado Shoten. [Japanese]
Knight, Frank H. 1960. Rischio, Incertezza e Profitto, with a new preface, and an introduction by Tullio Bagiotti. Translated by Michelangelo Giorda. Firenze: La Nouva Italia. [Italian]
Knight, Frank H. 1964 [1957]. Risk, Uncertainty, and Profit, with a new preface. Reprints of Economic Classics. New York: A.M. Kelley.
Knight, Frank H. 1964 [1921]. Risk, Uncertainty, and Profit. New York: Sentry Press.

Knight, Frank H. 1965 [1921]. Risk, Uncertainty, and Profit. Harper Torchbooks, The Academic Library. New York: Harper & Row.

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Knight, Frank H. 1971 [1921]. Risk, Uncertainty, and Profit, with an introduction by George J. Stigler. Phoenix Books. Chicago: University of Chicago Press.

Knight, Frank H. 1986 [1971]. Risk, Uncertainty, and Profit. Midway Reprint. Chicago: University of Chicago Press.

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Knight, Frank H. 2002 [1957]. Risk, Uncertainty, and Profit. Washington, D.C.: Beard Books.

Knight, Frank H. 2006 [1957]. Risk, Uncertainty, and Profit. New York: Cosimo Classics.

 


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Last updated: 18-Feb-2010