Frank Hyneman Knight was born in McLean County, Illinois, and was educated at small denominational colleges in Tennessee. Knight received a BS and an MA from the University of Tennessee in 1913, before going on to Cornell University to pursue a PhD in philosophy. After being rebuffed by the philosophy faculty, Knight enrolled in the department of economics, where he completed his doctoral dissertation titled “A Theory of Business Profit” in 1916. Published with significant revisions under the title Risk,Uncertainty and Profit (1921), this work develops the crucial distinction between rent, or the legitimate and predictable return on a business share, on the one hand, and profit, which is the product of entrepreneurial risk‐taking in an environment of uncertainty, on the other hand. Although this book remains a classic of neoclassical economic theory, virtually all of Knight’s subsequent work combines a respect for the legitimate explanatory power of economics with a philosopher’s skepticism about its ethical and methodological limitations.
Knight also is remembered for two influential collections of articles and papers, The Ethics of Competition (1935) and Freedom and Reform (1947), reflecting two different periods of his career. The majority of the essays in the first volume were written during the 1920s while Knight was a professor of economics at the University of Iowa. In essays like “The Ethics of Competition” and “Ethics and the Economic Interpretation,” Knight was highly critical of the “apologetic economics” of his day. Because the free‐market system of prices rests only on the factual coincidence of supply and demand, which are products of the economic system, it can never be defended as ethical. His second, methodological complaint is that insofar as neoclassical economics treats preferences as static or given, it cannot speak to the pluralistic motivations and aspirations of real persons. In attempting to remedy what he saw as the reductionism of neoclassical economics, Knight turned to the writings of German institutional thinkers, particularly Max Weber. Knight’s translation of Weber’s General Economic History (1927) was the first of Weber’s major works to appear in English.
Knight’s interest in developing an American institutionalist economics was the primary motive behind his appointment as professor of economics at the University of Chicago in 1927, where he taught until his retirement in 1952. Along with his colleague, Jacob Viner, Knight is regarded as one of the formative influences on the Chicago School of Economics. Among Knight’s students during his early years at Chicago were Milton Friedman, George Stigler, Henry Simons, Aaron Director, and, later, James Buchanan. Knight also was a major influence on the sociologist Edward Shils, who attended Knight’s lectures on Max Weber while at Chicago. In addition to the profound influence he was to have on particular students, Knight’s textbook, The Economic Organization (1933), was used as a basic text in the social sciences at Chicago for a number of years. Knight never endorsed the Chicago School’s later positivism or the public choice application of rational actor models to political behavior, but he is widely cited as a major influence among American free‐market economists in the latter half of the 20th century. In the aftermath of World War II, Knight gathered with F. A. Hayek and other postwar defenders of liberty at the first meeting of the Mont Pelerin Society. He also was one of the cofounders of the Committee on Social Thought at Chicago in 1945.
Knight’s reputation as a classical liberal thinker stems mainly from his writings of the late 1930s and 1940s, many of which are collected in the volume Freedom and Reform. Knight objected just as strenuously to the New Deal’s economic reforms as he had to the laissez‐faire apologists of the 1920s. The essays comprising Freedom and Reform center on four main themes. The first concerned the vogue for social experimentation and economic planning, about which Knight complained bitterly. Even if we could agree on what should be done for the betterment of society, what he characterized as the insurmountable value problem, social reforms, Knight maintained, always come at the cost of some measure of human freedom, clearly a value worthy of respect. Second, he noted the implicit tension between the unchecked workings of the free market and the moral and sociological underpinnings necessary for the maintenance of democratic government, or what Knight called governmentby discussion. Third, Knight was simultaneously fascinated and repelled by the social ethics of Christianity. While acknowledging that the religious instinct was natural to human beings, he criticized attempts to derive social justice from the Christian gospels and dismissed natural law philosophies as the “last refuge of a bigot.” Finally, rather than defending freedom for its anticipated benefits, whether economic or social, Knight’s preference for limited government was based on a profound skepticism about the frailties of human nature and the “sickness of liberal society.” He defended freedom for its own sake with no illusions about the uses to which flawed human beings might choose to put their liberty. Knight’s other major works include a third collection of papers On the History and Method of Economics (1956), as well as The Economic Order and Religion (with Thornton W. Merriam, 1945) and Intelligence and Democratic Action (1960).
Boyd, Richard. “Frank H. Knight and Ethical Pluralism.” Critical Review 11 (Fall 1997): 519–536.
Emmett, Ross B. “Frank H. Knight (1885–1972): A Bibliography of His Writings.” Research in the History of Economic Thought and Methodology (Archival Supplement 9): 1–100.
———. “‘What Is ‘Truth’ in Capital Theory? Five Stories Relevant to the Evaluation of Frank Knight’s Contribution to the Capital Controversy.” New Economics and Its History. John B. Davis, ed. (Annual Supplement to History of Political Economy, vol. 29). Durham, NC: Duke University Press, 1997. 231–250.
Knight, Frank H. The Ethics of Competition and Other Essays. New Brunswick, NJ: Transaction Publishers, 1997.
———. Freedom and Reform: Essays in Economics and Social Philosophy. Indianapolis, IN: Liberty Press, 1982.
———. Risk, Uncertainty, and Profit. Boston: Houghton, Mifflin, 1921.