Frank Knight: Economics

“Nor are the general laws of economics "institutional." They work in an institutional setting, and upon institutional material; institutions supply much of their content and furnish the machinery by which they work themselves out, more or less quickly and completely, in different actual situations. Institutions may determine the alternatives of choice and fix the limits of freedom of choice, but the general laws of choice among competing motives or goods are not institutional unless rational thinking and an objective world are institutions, an interpretation which would make the term meaningless. Economic activity consists in the use of certain resources by certain processes, to produce "wealth." The content of the concept wealth is largely institutional, and the resources available and processes known and used at any place and time for producing wealth are in a sense historical products; but there are general laws of production and consumption which hold good whatever specific things are thought of as wealth and whatever productive factors and processes in use.”

Frank Knight

Source: "The limitations of scientific method in economics", 1924, p. 129 (2009 edition)

World , Law , Motivation , Thinking

“Economics and ethics naturally come into rather intimate relations with each other since both recognizedly deal with the problem of value.”

Frank Knight

Source: The Ethics of Competition, 1935, p. 11

Nature , Problem

“In spite of all the foregoing, there is a science of economics, a true, and even exact, science, which reaches laws as universal as those of mathematics and mechanics. The greatest need for the development of economics as a growing body of thought and practice is an adequate appreciation of the meaning, and the limitations, of this body of accurate premises and rigorously established conclusions. It comes about in the same general way as all science, except perhaps in a higher degree, i. e., through abstraction. There are no laws regarding the content of economic behavior, but there are laws universally valid as to its form. There is an abstract rationale of all conduct which is rational at alt, and a rationale of all social relations arising through the organization of rational activity.”

Frank Knight

Source: "The limitations of scientific method in economics", 1924, p. 127 (2009 edition)

Law , Way , Behavior , Mathematics

“[In 1932, Lionel Robbins declared economics ‘the science of choice’ (Robbins 1932). In the same year, when students at the University of Chicago opened their social sciences course reader, they read Knight’s response:] Such definitions come too near to saying that economics is the science of things generally, of everything that men are for practical reasons interested in. Such a definition is useless and misleading”

Frank Knight

Source: The Economic Organization, 1951, p. 4 as cited in: Ross B. Emmett (ed). The Elgar Companion to The Chicago School of Economics http://books.google.com/books?id=MaCciKWcDIAC&pg=PA54, 2008. p. 53

Men , Universe , Science , Reading

“[We may view the] economic organization as a system of prize relations. Seen in the large, free enterprise is an organization of production and distribution in which individuals or family units get their real income, their "living," by selling productive power for money to "business units" or "enterprises", and buying with the money income thus obtained the direct goods and services which they consume. This view, it will be remembered, ignores for the sake of simplicity the fact that an appreciable fraction of the productive power in use at any time is not really employed in satisfying current wants but to make provision for increased want-satisfaction in the future; it treats society as it would be, or would tend to become, with progress absent, or in a “static” state.”

Frank Knight

Source: The Economic Organization, 1933., p.59-60; on the circular-flow of income and the circular-flow diagram.

Money , Family , Business , Time

“Since economics deals with human beings, the problems of its scientific treatment involves fundamental problems of the relations between man and his world. From a rational or scientific point of view, all practically real problems are problems in economics. The problem of life is to utilize resources "economically," to make them go as far as possible in the production of desired results. The general theory of economics is therefore simply the rationale of life. - In so far as it has any rationale! The first question in regard to scientific economics is this question of how far life is rational, how far its problems reduce to the form of using given means to achieve given ends. Now this, we shall contend, is not very far; the scientific view of life is a limited and partial view; life is at bottom an exploration in the field of values, an attempt to discover values, rather than on the basis of knowledge of them to produce and enjoy them to the greatest possible extent. We strive to "know ourselves," to find out our real wants, more than to get what we want. This fact sets a first and most sweeping limitation to the conception of economics as a science.”

Frank Knight

Source: "The limitations of scientific method in economics", 1924, p. 97 (2009 edition); Lead paragraph

Life , World , Question , Knowledge

“Most striking feature… is the author’s failure to understand the elementary mechanics of the competitive economic organization.”

Frank Knight

Source: "Historical and theoretical issues in the problem of modern capitalism", 1928, p. 134

Failure , Understanding

“The Ethics of Competition is a book of Frank H. Knight's writings on a common theme: the problem of social control and its various implications. Knight believed in free economic institutions but was also aware that the competitive economic system could be improved. One of the central figures of neoclassical economics in the twentieth century, Knight pursued a lifelong campaign against irrationalities of nationalism, religious fanaticism, and group conflict, while conceding that these were fundamental orientations of human action that might yet frustrate his own work as an economist. While Knight vigorously defended human freedom and the liberal order, he also was sufficiently moved by the shortcomings of liberalism as to condemn it as rife with abuse.”

Frank Knight

Abstract
The Ethics of Competition, 1935

Books , Problem , Freedom

“In spite of all the foregoing, there is a science of economics, a true, and even exact, science, which reaches laws as universal as those of mathematics and mechanics. The greatest need for the development of economics as a growing body of thought and practice is an adequate appreciation of the meaning, and the limitations, of this body of accurate premises and rigorously established conclusions. It comes about in the same general way as all science, except perhaps in a higher degree, i. e., through abstraction. There are no laws regarding the content of economic behavior, but there are laws universally valid as to its form.”

Frank Knight

There is an abstract rationale of all conduct which is rational at alt, and a rationale of all social relations arising through the organization of rational activity.
Source: "The limitations of scientific method in economics", 1924, p. 127 (2009 edition)

Law , Universe , Mathematics , Way