Knight (
BA, Milligan College, 1911;
BS and
AM, Tennessee, 1913;
PhD, Cornell, 1916) was born in 1885 in
McLean County, Illinois, the son of Julia Ann (Hyneman) and Winton Cyrus Knight. After his early study at the
University of Tennessee, most of his academic career was spent at the
University of Chicago, where he was the Morton D. Hall Distinguished Service Professor of Social Science and Philosophy. Knight was one of the world's leading economists, having made significant contributions to many problems of both economic theory and social philosophy. He is best known for his
Risk, Uncertainty and Profit, a study of the role of the entrepreneur in economic life. In 1950 he was president of the
American Economic Association and in 1957 the recipient of its coveted Francis A. Walker Award, given "not more frequently than once every five years to the living (American) economist who in the judgment of the awarding body has during his career made the greatest contribution to economics." His ashes are interred in the crypt of
First Unitarian Church of Chicago. Knight is best known as the author of the book
Risk, Uncertainty and Profit (1921), based on his
PhD dissertation at
Cornell University. In that book, he carefully distinguished between economic risk and
uncertainty. Situations with risk were those where the outcomes were unknown but governed by
probability distributions known at the outset. He argued that these situations, where decision making rules such as maximizing expected utility can be applied, differ in a deep way from "uncertain" ones, in which not only the outcomes, but even the probability models that governed them, were unknown. Knight argued that uncertainty gave rise to
economic profits that
perfect competition could not eliminate. While most economists now acknowledge Knight's distinction between risk and uncertainty, the distinction has not resulted in much theoretical modelling or empirical work. However, the Knightian concept of uncertainty has been recognized in a variety of works:
John Maynard Keynes discussed it at length in his Treatise on Probability; Armen Alchian relied on it for discussing market behavior in his seminal paper Uncertainty, Evolution and Economic Theory; Paul Davidson incorporated it as an essential element in the
Post Keynesian school of economics he co-founded; and
G.L.S. Shackle explored the methodological consequences of Knight's and Keynes's fundamental uncertainty in his Epistemics and Economics. A more model-oriented contribution is the "Markets from Networks" model developed by
sociologist Harrison White from 2002. Knight also famously debated
A. C. Pigou about
social costs. He also contributed to the argument for
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, which has since become known as
Wardrop's Principle: Knight was a co-founder and vice president of the
Mont Pelerin Society of like-minded economists. Knight was raised Christian, but later became an atheist. He translated
Max Weber's
General Economic History into English in 1927. ==Notable works==