Risk, Uncertainty, and Profit Institutional Economics Translation Series

Author: Frank H. Knight (USA) / An Jia
Publisher:
Publish Date: 2006-02-14
Features: This book is a landmark work in the history of economics. George Stigler praised it as one of the two most influential works written before World War II that still have significant impact today. Over the course of the 20th century, economic thought underwent three overlapping and highly debated phases. The first phase was the "marginal revolution" stage, synthesized and systematized by Marshall into neoclassical economic thought; the second phase was the "Keynesian revolution," which questioned the laissez-faire principles of neoclassical economics; the third phase emerged in the late 1960s and is known as the "neoclassical counter-Keynesian revolution," a revolution that had been for a long time and had many supporters, with one of the most important figures being the author of this book, Frank H. Knight. This book provides a standard exposition of neoclassical economics, where Knight devoted himself to explaining why perfect competition does not necessarily eliminate profits. His core point differs from the concept of "risk" in the "uncertainty" concept. According to Knight's explanation, risk refers to situations where the outcome can be determined with certainty and can be transferred through insurance; uncertainty, on the other hand, refers to situations where the objective probability is completely unknown. Knight believed that even in long-run equilibrium, entrepreneurs would earn profits as a reward for bearing uncertainty.