Knight Frank is considered a classic of modern economics. And this is not surprising - this person has systematized huge amounts of data, on the basis of which now all the prosperous enterprises operate (whether they know it or not). He has a rather large scientific legacy, among which one book occupies a special place. Frank Knight created “Risk, Uncertainty, and Profit” as a work that examined the fundamentals of entrepreneurship and the plus. 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 distinguished by considerable free thought and education. In addition, he showed diligent diligence and considerable intelligence, thanks to which he received good grades. 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 dissertation. It was called The Theory of Entrepreneurial Value and Distribution, which made it possible even then to judge the width and depth of his knowledge. Thus began Frank Knight economist. Theses of his "Theory …" with certain changes are presented in the book "Risk, Uncertainty and Profit", published in 1921.
The specifics of economic theory
Frank Knight turned information into a pure abstraction. Due to the fact that he possessed a significant reserve of knowledge in the fields of social sciences, philosophy, and theology, he expressed a number of interesting thoughts that relate to the eternal problems of economic theory. It should be noted a certain split. So, on the one hand, economic theory was considered as pure science. It was believed that she was dealing with the conclusions that were derived from a certain system of provisions that are not in doubt. On the other hand, it was considered from the point of view of customs, institutions and legal norms. These two approaches are not tried on 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, Frank Knight received initial fame. Profit, in his opinion, has a unique nature. Thus, income from capital cannot be considered together with rent, interest, and wages. This is due to the fact that profit always has an element of uncertainty. In this case, special attention was paid to specific features. First of all, the difference between uncertainty and risk should be noted. So, the first can not be expressed by any statistics, since non-recurring events are the basis of uncertainty. In this case, 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. There are interesting nuances here.
The specifics of the theory of uncertainty and profit
If everything was clearly defined, then it would not be necessary to manage and control in the modern sense of these words. Raw materials, goods and services would simply go to consumers. Therefore, you must understand that the benefits are created for the market. The basis for the selection are forecasts about the needs of consumers. That is, the manufacturer assumes responsibility for meeting the needs of the consumer. Control and management in this case are assigned to a small group - entrepreneurs. Due to the presence of uncertainty, they are faced with questions about what and how to produce. Confident people take the risk and offer doubters and timid representatives of humanity an income of a certain level in exchange for a specific result.
The specifics of the book “Risk, Uncertainty and Profit”
It should be noted that clearly undefined concepts cannot be included in a perfect model without errors. Therefore, the author proposes 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 along with imperfect competition, risk and uncertainty. All this happens along with the use of methods to overcome the problematic aspects of the economy. Particular attention is paid to non-insured risk. Its nuances and special aspects are considered.
Who can I recommend a book written by Knight Frank
Moscow, Rostov, St. Petersburg - perhaps all these cities would have a more decent appearance (in terms of various violations, MAFs and the like) if the officials had familiarized themselves with the work “Risk, Uncertainty and Profit”. After all, this book is generally useful not only to managers, but also to many others who have to make decisions (like officials). After all, they have to deal with risks, the theme of which is well covered in this work. It will also provide interest for researchers, students and graduate students who study at universities of an economic orientation. Speaking about the positive aspects, it should be noted an extensive proof of the theory, which is additionally confirmed by arguments and facts. Thanks to this, one who has at least the slightest idea of the economy will be able to understand the materials of the book. The book has twelve chapters, but despite this, its volume is relatively small, so if you wish, you can easily get acquainted with the contents by spending a day (or a few if thoughtfully read). Now we present to your attention a brief summary.
What is said in the first part
Labor itself is divided into three parts. We will talk about the first part, which consists of two chapters. The first examines what place profit and uncertainty take in economic theory. Here is the comprehension of hypotheses and theories that were allowed during the development of science, which were developed at the time of the author’s life. The second chapter studies the theory of profit, and also establishes a connection between it and risk.
What is said in the second part
We begin with the third chapter. It examines the theory of choice and exchange. The fourth chapter is devoted to co-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 goods. The fifth chapter addresses economic change. In addition, they consider what progress would be if there was no uncertainty. The sixth chapter focuses on the secondary prerequisites for perfect competition.
