| Abstract: |
Much has been written, especially in economics and management, about Frank
Knight’s account of uncertainty and entrepreneurship. This paper attempts to
put that theory in the larger context of the intellectual currents, and to a
significant extent the economic history, in which Knight found himself. In
response to rapid economic growth and the emergence of the large industrial
enterprise in the U. S. in the late nineteenth and early twentieth centuries,
many came to believe that the classical liberalism of the nineteenth century
would need to be amended – if not jettisoned entirely. Frank Knight was among
these. He was, along some dimensions, a Progressive and an Institutionalist.
What set him apart from Progressives like John Dewey, however, was his theory
of economic knowledge. Whereas Dewey and others insisted on the panacea of
science as the solution to the “social question, ” Knight understood that in a
world of uncertainty, the cognitive faculty of judgment was essential and
unavoidable, thus providing a new intellectual underpinning for many of the
institutions of nineteenth-century liberalism. Yet Knight did not follow the
implications of his theory of knowledge all the way to their conclusions. This
is because – perhaps among other reasons – he began with a well-developed
model of perfect competition, which, unlike such contemporaries as Joseph
Schumpeter and F. A. Hayek, he was never willing to relinquish as a normative
ideal. Perhaps surprisingly, Frank Knight was a Progressive and an
Institutionalist because he believed in the neoclassical model of the economy. |