The Weekly Sage hopes to regularly bring brief profiles of key contributors to thought and faith before a Christian audience for historical education and awareness of valuable resources.

Sometimes history brings together a special combination of resources and people that form a center of intellectual influence. The Weekly Sage will occasionally consider such “Schools” together. As such this is the second of a five-week series on Chicago-School Economists. This will be understood simply to mean uniquely impactful members of the faculty of economics at the University of Chicago in the 20^th century.

Frank Knight

• “In determining one’s general attitude toward social problems, there are very weighty presumptions in favour of a generally ‘conservative’ position. One of the evils which has resulted from carrying the natural science conceptions over into the field of social discussion is the common delusion that by the happy discovery of some formula, it may be possible to change the character and constitution of society in a way comparable to the modern transformation of technology through science. The two problems are utterly different, and the natural consequences of any such a belief is to create a danger of social disintegration and the destruction of culture and life.”[1]
• “Democracy, which has been defined as ‘government by discussion’ must rest on an accepted common system of ethical principles, and the connection between agreement and objectivity need not be elaborated here. However individualistic a society may be, this is still true. Individualism itself is an ethical principle, and it must be defined and interpreted in an elaborate code covering economic, political, social, and religious relations. The rational social acceptance of ethical principles is to be distinguished from traditionalism, unconscious or dogmatic-emotional. In a true democracy individual relations rest on a system of acknowledged and felt obligations on one hand and conscious ‘legitimate’ expectations on the other.”[2]

Frank Knight (1885-1972) was a leading American economist and scholar of the 20^th century. He left a lasting legacy on the field of economic thought through his writing and work building and overseeing the associated programs at the University of Chicago. While Knight himself never won the Nobel Prize in Economic Science, several of his students, such as Milton Friedman, George Stigler, and James Buchanan, did win the prestigious award, reflecting both Knight’s skill as an educator and the value of his ideas.

While the lake-side metropolis was the center of Knight’s influential career, he was born and raised in the rural Illinois countryside of McLean County. While his parents imparted a Christian influence on Knight’s youth, he eventually moved to a rejection of organized religion in atheism. This transformation may have occurred in his university years, as a varied program of study, including German, philosophy, and economics ultimately, indicate a mind in ferment.[3]

Eventually, Knight’s studies culminated in a PhD in Economics at Cornell University, earned by completing a dissertation originally titled Cost, Value, and Profit.[4] This later became the work Risk, Uncertainty, and Profit, a seminal work in the understanding of risk, where Knight argued that risk can be assessed in terms of probable outcomes, while uncertainty defines situation where even probability is unknown. This contribution stands very unique and famous in the economic profession, and justified Knight’s high standing enabling him to move to the prestigious University of Chicago.

At Chicago, Frank Knight worked with Professor Jacob Viner to co-edit the Journal of Political Economy and develop high standards in coursework that made Chicago’s program stand out nationally. Attracting excellent students, Knight contributed to the development of many leading scholars, as well as holding together a faculty, including scholars such as Henry Simons and John Nef, which was composed of varied and sometimes conflicting characters. Knight steadily pursued these disciplines, and his authority in scholarly circles remained strong, as reflected by his appointment as founding member and Vice-President of the Mont Pelerin Society.

While Knight’s written work never reached the heights of influence his PhD dissertation Risk, Uncertainty, and Profit achieved, he remained a very productive and diverse scholar. Through simple textbook-like expositions such as The Economic Organization, technical contributions such as “Cost of Production and Price,” and works of social relevance such as Intelligence and Democratic Action, Knight maintained influence through exposition of pressing issues in the economic field, and demonstrated his intellectual virtuosity.

Within Knight’s writing, several themes and emphases clearly emerge. He was broadly concerned with how to execute social science well, including the limitations and methodology of economics. He advocated a broad view of the social scientist as a scholar informed by history, biology, and mathematics, although taking none to excess or as the predominant investigative avenue. This diversity also led Knight to take and even-handed and critical approach. While he often laid down attacks on the principles or outworking of the economic order of the free market, he was equally unsparing with those who sought to replace it, usually concluding that capitalism was better than a host of unconvincing options.

In such inquiries, he never neglected the importance of ethics and values to the field of social science. Not convinced that man and his nature could be simply understood in terms of his material surroundings or pursuit of physical pleasure, Knight articulated a tentative view of social science that operated in light of received knowledge from centuries before. Unfortunately, Knight embraced some unfortunate conceptions of the Middle Ages as unceasingly violent and oppressive of ideas that led him to reject organized religion, tradition, and Church teaching, failing to recognize the real Christian heritage in the liberalism of the eighteenth and nineteenth centuries.

Nevertheless, Knight was always able to clearly lay out the fundamental roots of the economic order of the free market, and the principles on which economics as a science was based. His ability to see the connections between ideas and elements, such as cost, price, supply, and demand, often come through strongly in his writing. For Knight, the world and the men in it were an interconnected whole, but composed of independent parts. His analysis reflected the diversity of his studies and the humility of his thought. The timeless nature of many of his subjects recommend his works as thoroughly as does his career of scholarly investment.

• “The first commandment, with respect to any intelligent action, is self-evident: ‘compare the alternatives,’ beginning with understanding what they are. But that is what people dislike doing. And the second and third are, appraise the alternatives, and then act on the basis of the best knowledge or judgment that is to be had. The basic axiom is that it is better not to act unless it can be done intelligently; as people are and as the world is, the odds are strong that bad results, on balance, rather than good, will follow from acting ignorantly, at random – and acting on false knowledge is of course worse; but unhappily it is more common.”[5]
• “If the rulers of democracy, the demos, will not heed simple arithmetic, what is the use of talking and writing about problems which really are problems – not to mention developing highly mathematical formulas in which the ‘given’ magnitudes must be largely guessed at. Why engage in public discussion at all, unless one is content with what seems to be our role to serve as an antidote to the poison being disseminated by other social scientists, even economists? Is it not insulting one’s own intelligence? The serious fact is that the bulk of the really important things that economics has to teach are things that people would see for themselves if they were willing to see. And it is hard to believe in the utility of trying to teach what men refuse to learn or even seriously listen to. What point is there in propagating sound economic principles if the electorate is set to have the country run on the principle that the objective in trade is to get rid of as much as possible and get as little as possible in return, if they will not see that imports are wither paid for by exports, as a method of producing the imported goods more efficiently, or else are received for nothing, or if they hold that economy consists in having as many workers as possible assigned to a given task instead of the fewest who are able to perform it?”[6]

[1] Frank H. Knight, The Ethics of Competition and Other Essays, (New York: Harper & Brothers, 1936), 347-348.

[2] Ibid, 334-335.

[3] “Life,” Frank Hyneman Knight, New World Encyclopedia, accessed December 14, 2018, http://www.newworldencyclopedia.org/entry/Frank_Hyneman_Knight

[4] “Life,” Frank Hyneman Knight, New World Encyclopedia, accessed December 14, 2018, http://www.newworldencyclopedia.org/entry/Frank_Hyneman_Knight

[5] Frank H. Knight, Intelligence and Democratic Action, (Cambridge: Harvard University Press, 1960), 145.

[6] Frank H. Knight, On the History and Method of Economics, (Chicago: University of Chicago Press, 1956), 253-254.