Great Economists Since Petty and Boisguilbert
Edited by Gilbert Faccarello and Heinz D. Kurz
Chapter 75: Frank H. Knight (1885–1972)
Born and raised on a farm in McLean County, Illinois, Frank Knight (1885–1972) lived most of his life in the American Mid-West. After the completion of his university studies in eastern Tennessee and upstate New York (Cornell PhD, 1916), he returned to the Mid-West for an academic career spent at either The University of Iowa (1919–28) or The University of Chicago (1917–19, and 1928 until his death). His most famous contribution – grounding the theory of profit in the existence of uncertainty – was contained in Risk, Uncertainty, and Profit (Knight 1921), his doctoral dissertation. His subsequent defence of neoclassical theory against American institutionalism (Knight 1999a: 1–39, 112–32), his evaluation of economic ethics and the morality of competition (Knight 1999a: 40–60, 61–93), and his classic articulation of the price system in a market economy (eventually published in Knight 1951) led to his appointment at the University of Chicago in the late 1920s. From Hyde Park, he launched an attack on Austrian capital theory, resuscitated alternative/opportunity cost theory, and criticized the classical tri-partite division of productive factors, all in the context of the initiation of the Chicago price theory tradition. The group of like-minded scholars who gathered around Knight during the 1930s – Henry C. Simons and Lloyd Mints, plus students Allen Wallis, Milton Friedman, George Stigler, Homer Jones, and Aaron Director – formed the basis on which the post-war Chicago School of economics was built. Knight himself is often identified as the “dominant intellectual influence” (Stigler 1987:...
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