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J.M. Keynes and F.H. Knight : How to Deal with Risk, Probability and Uncertainty

Author

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  • Yasuhiro Sakai

    (Faculty of Economics, Shiga University)

Abstract

The purpose of this paper is to discuss and compare two giants in the history of economic thought, J.M. Keynes and F.H. Knight, with special reference to risk, probability, and uncertainty. It is in 1921 that both of them published apparently published similar books on the economics of risk and uncertainty. While Knight's contribution on risk and uncertainty is now well recognized, Keynes's accomplishments on probability and uncertainty have been rather ignored in the shadow of his most famous book The General Theory of Employment, Interest and Money (1936). This paper aims to focus on his earlier yet equally important book A Treatise on Probability (1921), and shed a new light on his outstanding ideas and everlasting influences on his later work including The General Theory. It is really interesting to see that Keynes's concept of probability and uncertainty can be well compared to Knight's distinction between a measurable risk and a non-measurable uncertainty.

Suggested Citation

  • Yasuhiro Sakai, 2016. "J.M. Keynes and F.H. Knight : How to Deal with Risk, Probability and Uncertainty," Discussion Papers CRR Discussion Paper Series A: General 15, Shiga University, Faculty of Economics,Center for Risk Research.
    • Handle: RePEc:shg:dpapea:15
    as

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    File URL: https://www.econ.shiga-u.ac.jp/risk/DPA15sakai20160315.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
    1. Ross B. Emmett, 2010. "Frank H. Knight," Chapters, in: Ross B. Emmett (ed.), The Elgar Companion to the Chicago School of Economics, chapter 6, Edward Elgar Publishing.
    2. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
    3. Hicks, John, 1977. "Economic Perspectives: Further Essays on Money and Growth," OUP Catalogue, Oxford University Press, number 9780198284079.
    4. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    5. Knight, Frank H., 2000. "Selected Essays by Frank H. Knight, Volume 1," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226446950 edited by Emmett, Ross B..
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    Cited by:

    1. Hubert Gabrisch, 2021. "GARCH Analyses of Risk and Uncertainty in the Theories of the Interest Rate of Keynes and Kalecki," wiiw Working Papers 191, The Vienna Institute for International Economic Studies, wiiw.

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    Keywords

    Keynes; Knight; risk; probability; uncertainty;
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