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Knight’s Risk, Uncertainty, and Profit is, by the author’s own account, “a study in ‘pure theory’.” From pure theory, the scientific method’s “successive approximations” explain empirical phenomena. But Knight did not fully develop the boundary conditions for theory. In this chapter, the author elucidates the demarcation of pure theory in Risk, Uncertainty and Profit. For comparison and contrast, the author uses Mises’s Austrian aprioristic methodology praxeology and its strict distinction between theory and thymology. The author finds that Knight and Mises largely agree on the nature and importance of pure theory but differ on its meaning and use. The author’s findings suggest that Knight, while arguing for aprioristic pure theory, still places empirical observation first.

I have been asked to explore how James Buchanan’s work on public finance and constitutional political economy might have emerged out of themes present in Frank Knight’s oeuvre, especially his Risk Uncertainty, and Profit. Buchanan’s body of work has inspired the development of a style of political economy sometimes described as Virginia or Constitutional Political Economy to distinguish it from the Chicago Political Economy with which George Stigler is associated, and with Stigler and Buchanan both being students of Knight. While Buchanan, unlike Stigler, did not write his dissertation under Knight’s supervision, this is a minor distinction because Buchanan regarded Knight as his de facto supervisor even though Roy Blough was his de jure supervisor. The author explains how Knight’s scholarly oeuvre can in large measure be detected in Buchanan’s effort to fashion an alternative approach to public finance and to articulate the field of study now called constitutional political economy.

Rawls, most visibly in A Theory of Justice, made numerous references to various topics in economics, and footnoted a significant number of economists. This paper will argue that Rawls made use of the ideal theory of markets as a reference point and as an analytical tool. In their ideal form, markets represent attributes Rawls intended to describe his system, and in their real-world guise embody certain sorts of striving – for instance, after power – that were central to Rawls’s justification of the original position. Markets also serve in Theory as a benchmark against which political forms can be criticized. Additionally, markets in Theory are approved of as allocative and wealth-producing mechanisms, but criticized for their final distributional results. The paper suggests that these assessments in Rawls likely originate in early essays by economist Frank Knight. Knight was, according to Pogge, the probable source for an early version of Rawls’s original position, and is footnoted in key spots in Theory. But the similarities between Knight’s reasoning and Rawls’s appear more significant still. Using Rawls’s extensively annotated copy of Knight’s Ethics of Competition, that supposition is explored.

I am indebted to Anthony Waterman for identifying the largely illegible phrase cuius regio, eius religio, found near the end of Ostrander’s notes. Waterman writes, in explanation, apropos of Martin Luther: Lit. ‘whatever of the king, so of the religion’: it means that L. thought (being the Erastian he was), that the religion of a country should be that of its sovereign prince. Note: (a), the assumption, almost universal at that time, that there can be only ONE church in any Christian nation; and (b) the assumption, standard until the Scottish Enlightenment I should think (though people like Locke begin to chip away at it) that – as Louis XIV put it with admirable economy, ‘l’etat c’est moi’ (Waterman to Samuels, December 12, 2002).

Published below are the course reading list and student notes taken by F. Taylor Ostrander in Frank H. Knight’s course, Current Tendencies, Economics 303, at the University of Chicago during Winter term of the 1933–1934 academic year. The reading list is surprisingly casual and uneven in detail among items. The notes are assumed, as usual in these volumes, to be a reasonably accurate summary account of what Knight said.

Our chapter discusses the myriad ways in which Frank H. Knight’s Risk, Uncertainty, and Profit (RUP) has been incorporated by different streams of scholarship dedicated to institutional analysis since 1990, when bibliometric evidence indicates a revival of interest in his classic work. Using citation analysis, the authors identify clusters of scholarship that build on Knight’s contributions, assessing which of his insights were absorbed by different subfields and how these have been connected to recent topics and concerns. The authors then qualitatively explore these results to throw new light on the recent history of institutional economics, using Knight’s RUP as a window into the evolution of (and inter-relations between) different research traditions that currently populate the field, including new economic sociology, comparative politics, evolutionary economics, entrepreneurial studies, environmental social sciences, international political economy, and the anthropology of finance. The authors conclude that Knight’s legacy remains unsettled, with different groups selectively absorbing a subset of his ideas and developing them in relative isolation from research conducted elsewhere. Nevertheless, boundary work connecting these separate areas reveals possible spaces for collaboration among scholars who study institutions building explicitly on Knightian insights.

The paper published below was prepared by Taylor Ostrander for Frank Knight’s course, Economic Theory, Economics 301, during the Fall 1933 quarter.

In 1933, Lionel Robbins asked Frank Knight if he could republish Knight’s Risk, Uncertainty and Profit (RUP) in order for students at the London School of Economics to continue to have access to the book. He also asked Knight to write a preface to provide an update on Knight’s changing economic views. Between 1933 and 1957, Knight wrote four new prefaces for reprint editions of RUP outlining changes in his views. In the prefaces, he identified four aspects of the theory expounded in RUP that he came to reject: (a) the method of successive approximation; (b) the separation of production from distribution; (c) the tri-partite division of the factors of production; and (d) any notion of a period of production. These rejections placed him squarely in opposition to F. A. Hayek’s theoretical work. He also identified the key features he had sought to develop in a monetary theory that would oppose J. M. Keynes and John Hicks. At the same time, he sought to identify the new theoretical ideas he was developing, including an enterprise-based theory of market exchange, and the adoption of a unitary resource, called capital. He also pointed to the work in social philosophy that he had begun in the 1940s, especially the need for a combined approach to social science using economic theory, ethics and social philosophy. The prefaces came to serve as a bridge between Knight’s original theory and what he would argue at the conclusion of his career.