Frank Knight: "Risk, uncertainty and profit"

Knight Frank is considered the classic of modern economics. And this is not surprising - this person has systematized huge amounts of data, on the basis of which all flourishing enterprises are now operating (whether they know it or not). He has a fairly large scientific legacy, among which a special place is occupied by one book. Frank Knight "Risk, uncertainty and profit" created as a work in which the foundations of entrepreneurship and the release of a plus are considered. But first things first.

Who is Frank Knight

This man was born in 1885 in the family of an Irish farmer who lived in the US state of Illinois. He was the first child of eleven children. According to reports, Frank Knight was noted for his considerable freedom of thought and education. In addition, he showed diligent diligence and considerable intelligence, due to which he received good marks. Initially, he entered Cornell University in 1913 and began to study philosophy. A year later he switched to economic theory. Already in 1916 he wrote a thesis. It was called "The Theory of Entrepreneurial Values and Distribution," which allowed us to judge the breadth and depth of his knowledge. So began to form Frank Knight, an economist. The theses of his "Theory ..." with certain changes are also presented in the book "Risk, uncertainty and profit" published in 1921.

Specificity of economic theory

Frank Knight turned information into a pure abstraction. Due to the fact that he possessed a considerable store of knowledge in the social sciences, philosophy and theology, he expressed a number of interesting thoughts that pertain to the eternal problems of economic theory. It should be noted a certain duality. So, on the one hand, economic theory was regarded as pure science. It was believed that she was dealing with conclusions that had been withdrawn from a certain set of provisions that were not put into doubt. On the other hand, it was considered from the point of view of customs, institutions and legal norms. These two approaches are not exemplary and organically complementing themselves. With a careful analysis of the works, it is difficult not to notice that the first point of view prevails.

Thanks to her and got the initial fame of Frank Knight. Profit, in his opinion, has a unique nature. Thus, income from capital can not be considered together with rent, interest and wages. This is due to the fact that profit always has an element of uncertainty. Special attention was paid to specific features. First of all, it should be noted the difference between uncertainty and risk. So, the first can not be expressed by any statistics, because the basis of uncertainty is non-recurring events. At the same time, the risk can be expressed by statistics and insured (that is, almost eliminated). Uncertainty concerns, first of all, market conditions and is a fundamental property of the entire economic system. Here there are interesting nuances.

Specificity of the theory of uncertainty and profit

If everything were clearly defined, then it would not be necessary to control and control in the modern sense of these words. Raw materials, goods and services would simply go to consumers. Therefore, it is necessary to understand that the benefits are created for the market. The basis for the choice is the forecasts about the needs of consumers. That is, the manufacturer takes responsibility for satisfying the needs of the consumer. Control and management are assigned to a small group of entrepreneurs. Due to the uncertainty, they are faced with questions about what and how to produce. Self-confident people take the risk and offer doubting and timid representatives of humanity income of a certain level in exchange for a specific result.

Specificity of the book "Risk, uncertainty and profit"

It should be noted that clearly not defined concepts can not be included in the perfect model without errors. Therefore, the author suggests in the second part of the book the theory of perfect competition. This part is deep, clear and concise at the same time. Here, its consideration is carried out together with imperfect competition, risk and uncertainty. All this happens together with the use of methods for overcoming the problematic aspects of the economy. Particular attention is paid here to non-insured risk. We consider its nuances and special aspects.

Who can recommend a book written by Knight Frank

Moscow, Rostov, St. Petersburg - perhaps all these cities would have a more decent look (in terms of various violations, IAFs and the like), if officials were familiar with the work "Risk, uncertainty and profit." After all, this book is generally useful not only for managers, but also for many others who have to make decisions (like bureaucrats). After all, they have to deal with risks, the topic of which is well covered in this work. It will also provide interest for scientists, students and graduate students who study in economically oriented universities. Speaking about positive aspects, it is necessary to note extensive proof of the theory, which is further confirmed by arguments and facts. Thanks to this, the person who has at least the slightest idea of the economy will be able to understand the materials of the book. There are twelve chapters in the book, but despite this, its volume is relatively small, so if you want, you can easily get acquainted with the content, having spent a day (or several if you read it thoughtfully). Now we present to your attention a brief summary.

What is said in the first part

The work itself is divided into three parts. We will talk about the first part, which consists of two chapters. The first examines the place of profit and uncertainty in economic theory. Here there is a comprehension of hypotheses and theories that were admitted during the development of science, which were developed at the time of the author's life. The second chapter deals with the theory of profit, and also establishes the relationship between it and the risk.

What is said in the second part

We will begin with the third chapter. It deals with the theory of choice and exchange. The fourth chapter is devoted to joint production and capitalization. Also, attention is paid to the question of why different people make their choice in favor of a certain form of distribution of benefits. The fifth chapter deals with economic changes. In addition, they consider what progress would be in the absence of uncertainty. In the sixth chapter, attention is paid to secondary prerequisites for perfect competition.

What is said in the third part

It begins with the seventh chapter. Here the essence of uncertainty and risk is considered. It must be read to deal with the eighth chapter. It pays attention to the mechanisms and ways to overcome uncertainty. In the ninth chapter, the enterprise and profits are considered. This is perhaps one of the most desired chapters for many practitioners and those who want to become them. The tenth chapter is a continuation of the ninth, but here special attention is paid to managers who are on salary. Also here the author concentrates on illusory things in the conduct of his enterprise. The eleventh chapter focuses attention on uncertainty and social progress. After all, changes are both sources of problems, and potential opportunities for opening reserves from enterprises. The twelfth chapter focuses on the social aspects of uncertainty and profit.