Knight Definition Of Risk

Boston and new york houghton mifflin co the riverside press 1921 a few corrections of obvious typos were made for this website edition.

Knight definition of risk. Knight s dis tinction addresses only the uncertainty. Knight frank h risk uncertainty and profit boston. Uncertainty must be taken in a sense radically distinct from the familiar notion of risk from which it has never been properly separated. His definition is based on a particular objectiv ist.

Critique of knight s definition a criticism of knight s definition is the obvious one that it really is not a definition of risk. Knight introduces knightian uncertainty in part iii chapter vii the meaning of risk and uncertainty. The concept acknowledges some fundamental degree of ignorance a limit to knowledge and an essential unpredictability of future events. Frank knight was an idiosyncratic economist who formalized a distinction between risk and uncertainty in his 1921 book risk uncertainty and profit.

In economics knightian uncertainty is a lack of any quantifiable knowledge about some possible occurrence as opposed to the presence of quantifiable risk e g that in statistical noise or a parameter s confidence interval. Knight ph d associate professor of economics in the state university of iowa. Knight s risk uncertainty and profit.