Frank Knight: Limit

“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)

“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)

“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

“In Professor Pigou's study the argument that free enterprise lead to excessive investments in industry having relatively upward-sloping cost curves is developed with the aid of concrete example, the case of two roads; Suppose that between two points there are two highways, one of which is broad enough to accommodate without crowding all the traffic which may care to use it, but is poorly graded and surfaced; while the other is a much better road, but narrow and quite limited in capacity. If a large number of trucks operate between the two termini and are free to choose either of the two routes, they will tend to distribute themselves between the roads in such proportions that the cost per unit of transportation, or effective returns per unit of investment, will be the same for every truck on both routes. As more trucks use the narrower and better road, congestion develops, until at a certain point it becomes equally profitable to use the broader but poorer highway.”

Frank Knight

Source: The Ethics of Competition, 1935, p. 211

“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)