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Risk, Uncertainty and Profit
Boston and New York: Houghton Mifflin Company,, [1921]. Octavo (202 × 126 mm). Original red cloth, spine lettered gilt. Spine ends lightly rubbed, endpapers toned; a very good copy. First edition of Knight's first major work, which was written as a doctoral dissertation at Cornell in 1916. It is "the first work of any importance, and in any field of study, that deals explicitly with decision-making under conditions of uncertainty" (Bernstein, p. 219). Knight "attempts to analyse 'the problem of the contrast between perfect competition and actual competition' and finds it necessary in the pursuit of this aim to cover a far wider field than is suggested by the title or preface. It would, in fact, be difficult to discover a better short statement of pure economic theory" (Batson). "Knight is known primarily for two ideas. The first is his distinction between 'risk' and 'uncertainty,' and the second is his location of the source of 'profit in the returns from exposure of business activities to uncertainty... Knight believed that for uncertain events it is meaningless to speak of them probabilistically - a view that was later to play a significant role in challenges to the usefulness of maximizing expected utility on subjectively formed probability beliefs, in particular, (Ellsberg (1961) [Risk, Ambiguity, and the savage axioms, QJE 75, no. 4]. Richard Cantillon... in his 1755 Essay of the Nature of Commerce... had realized quite early that the source of profit within a firm was the remuneration that was contingent on the success of the firm after all fixed payment contracts are honored, including interest, wages, and rent. However, in a competitive economy under certainty all profit is competed away so that profits are zero in equilibrium. Knight therefore argued that profits could arise only in an economy where the future was not known with certainty." (Rubenstein, A History of the Theory of Investments, pp. 50-51). PROVENANCE: The author's own copy, boldly signed F. H. Knight on the front pastedown. The copy bears autograph pencil changes to three pages (53, 101, 152): two use proofreading symbols to insert and delete phrases, one corrects a reference to a figure in the text, another a spelling error in an author's name ("Mills" corrected to "Mill"). With a further fifteen openings carrying marginal pencil side-rules and underlining to the text. ANNOTATIONS Totals: 4 instances of textual corrections (p. 53; 101; 152n). The rest small underlinings and marginal side-rules. p. 53: Proofreading mark for insertion used above "in order to ^ some ulterior object", with "(obtain?)" written above. p. 101: Underlining "at a uniform price" with marginal squiggle. Corrects "it is immaterial what shape the curve has below point 3" to "to left of point 3", with "below" underlined. Corrects "No doubt in any one industry" to "for any one service", with "one industry" underlined. p. 152n: Corrects "Mills, Principles of Political Economy" to "Mill", striking through the "s" and the proofing symbol for delete in the margin. p. 230: Small mark in margin. p. 232: Small mark in margin. p. 233: Small mark in margin. p. 234: Small mark in margin. p. 235: 2 small marks in margin. The word "erratic" in last paragraph underlined. p. 237n: Small mark in margin. p. 240: Small mark in margin. p. 241: Small mark in margin. p. 243: Small mark in margin. p. 245: Words "specialization", "time length", "large groups" underlined. p. 251: Small mark in margin. p. 252: 3 small marks in margin.. p. 253: 5 small marks in margin. p. 254: 3 small marks in margin. p. 255: Small mark in margin. p. 256: Large mark in margin. p. 257: Small mark in margin. p. 258: Small mark in margin. p. 259: 3 small marks in margin. p. 260: 2 small marks in margin. p. 261: 2 small marks in margin. p. 273: Small mark in margin. p. 330: Small mark below final paragraph, above footnote. Presentation inscription to the front free endpaper: "To George Stigler May 27, 1963, F.H.K.", written in a rather shaky hand (Knight was 78 at the time). Following his master's degree at Northwestern University, Stigler moved to Chicago in 1933 to work on his dissertation under Knight's supervision at the University of Chicago. The thesis was completed in 1938 and published in 1941 under the title Production and Distribution Theories. In a memoir entitled Frank Knight as teacher, (Journal of Political Economy, 1973) Stigler observed that "he was so generous with time and knowledge that some dissertations - I have my own in mind - ought at a minimum to have listed a collaborator." Stigler remained in contact with Knight after his retirement, and contributed a preface to the Chicago reprint of Risk, Uncertainty and Profit. By descent to the present owner.
      [Bookseller: Peter Harrington]
Last Found On: 2017-12-18           Check availability:      Biblio    

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