Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-03T00:43:30.149Z Has data issue: false hasContentIssue false
  • English
  • Français

UNCERTAINTY, PROFIT AND ENTREPRENEURIAL ACTION: FRANK KNIGHT’S CONTRIBUTION RECONSIDERED

Published online by Cambridge University Press:  11 May 2010

GEOFFREY T. F. BROOKE
Get access Rights & Permissions [Opens in a new window]

Abstract

Frank H. Knight held two different concepts of “uncertainty” in Risk, Uncertainty and Profit (1921). The first is based on the possibility of insuring against an outcome. This interpretation can be found in the existing literature on Knight’s work. The second refers to all instances where individuals have subjective expectations about the future. This second meaning forms the basis of Knight’s (1921) theory of profit and entrepreneurial action (Knight I). Knight I is limited; it provides no explanation of the incentive for entrepreneurial action. Knight’s neglected later theory of profit (1942) (Knight II) highlights the deficiencies of Knight I by offering a clear incentive for entrepreneurial action. The differences between the two theories of profit reflect the impact of incorporating historical time into economic analysis.

Type
Research Articles
Information
Journal of the History of Economic Thought , Volume 32 , Issue 2 , June 2010 , pp. 221 - 235
Copyright
Copyright © The History of Economics Society 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Arrow, Kenneth J. 1951. “Alternative Approaches to the Theory of Choice in Risk-Taking Situations.” Econometrica 19 (October): 404–437.CrossRefGoogle Scholar
Baumol, William J. 1968. “Entrepreneurship in Economic Theory.” American Economic Review 58 (May): 64–71.Google Scholar
Bianchi, Milo and Henrekson, Magnus. 2005. “Is Neoclassical Economics Entrepreneurless?” KYKLOS 58 (August): 353–377.CrossRefGoogle Scholar
Dempsey, Bernard W. 1960. The Frontier Wage. Chicago: Loyola University Press.CrossRefGoogle Scholar
Dreze, Jacques H. 1985. “(Uncertainty and) The Firm in General Equilibrium Theory.” The Economic Journal 95 (Supplement: Conference Papers): 1–20.CrossRefGoogle Scholar
Friedman, Milton. 1962. Price Theory: A Provisional Text. Chicago: Aldine, 1976.Google Scholar
Gunning, J. Patrick. 1993. “Entrepreneurists and Firmists: Knight vs. the Modern Theory of the Firm.” Journal of the History of Economic Thought 15 (Spring): 31–53.CrossRefGoogle Scholar
Hicks, John R. 1931. “The Theory of Uncertainty and Profit.” Economica 32 (May): 170–189.CrossRefGoogle Scholar
Jehle, Geoffrey A. and Reny, Philip J. 2000. Advanced Microeconomic Theory, 2nd edition. Boston: Addison Wesley.Google Scholar
Kihlstrom, Richard E. and Laffont, Jean-Jacques. 1979. “A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion.” Journal of Political Economy 87 (August): 719–748.CrossRefGoogle Scholar
Knight, Frank H. 1921. Risk, Uncertainty and Profit. New York: Harper and Row, 1965.Google Scholar
Knight, Frank H. 1930. “Statics and Dynamics: Some Queries Regarding the Mechanical Analogy in Economics.” In Emmett, Ross B., ed., Selected Essays by Frank Knight, Volume 1. Chicago: The University of Chicago Press, 1999.Google Scholar
Knight, Frank H. 1942. “Profit and Entrepreneurial Functions.” Journal of Economic History 2 (December): 126–132.CrossRefGoogle Scholar
Langlois, Richard N. and Cosgel, Metin M. 1993. “Frank Knight on Risk, Uncertainty, and the Firm: a New Interpretation.” Economic Enquiry 31 (July): 456–465.CrossRefGoogle Scholar
LeRoy, Stephen F. and Singell, Larry D. 1987. “Knight on Risk and Uncertainty.” Journal of Political Economy 95 (April): 394–406.CrossRefGoogle Scholar
Lucas, Robert E. Jr. 1978. “On the Size and Distribution of Business Firms.” Bell Journal of Economics 9 (Autumn): 508–523.CrossRefGoogle Scholar
Mas-Colell, Andreu, Whinston, Michael D., and Green, Jerry R. 1995. Microeconomic Theory. New York: Oxford University Press.Google Scholar
Schultz, Theodore W. 1975. “The Value of the Ability to Deal with Disequilibria.” Journal of Economic Literature 13 (September): 827–846.Google Scholar
Schultz, Theodore W. 1980. “Investment in Entrepreneurial Ability.” Scandinavian Journal of Economics 82 (4): 437–448.CrossRefGoogle Scholar
Schumpeter, Joseph Alois. 1911. The Theory of Economic Development. New York: Galaxy, 1961.Google Scholar
Schumpeter, Joseph Alois. 1954. History of Economic Analysis. London: George Allen and Unwin Ltd.Google Scholar
Stigler, George J. 1987. “Frank Knight.” In Eatwell, John, Milgate, Murray, and Newman, Peter, eds., The New Palgrave Dictionary of Economics, Vol. III. New York: Stockton Press, 55–59.Google Scholar
Thünen, Johann Heinrich von. 1842, 1850, 1863. The Isolated State. Oxford: Pergamon Press Ltd., 1966.Google Scholar
Weston, J. Fred. 1954. “The Profit Concept and Theory: A Restatement.” Journal of Political Economy 62 (April): 152–170.CrossRefGoogle Scholar