Uncertainty and the social organization of economic activity

Abstract

The last two chapters of Frank H. Knight's Risk, Uncertainty and Profit are seldom cited and frequently ignored. But in those chapters, Knight moves from entrepreneurial judgment and organizational strategies to meet the dilemmas uncertainty presents in a firm to the wider question of how uncertainty affects the social organization of economic activity. Ignoring the concluding chapters of Knight's book means we miss an important part of his early career thoughts on the tradeoffs between free enterprise and the social organization of economic activity. The purpose of the paper is to lay out the perspective on social economic organization that he took in the final two chapters of his first major work against the context of his other contemporary writings.