I never responded to a question that Pat Gunning asked me a couple of weeks
ago.

Pat asked, "You seem to be saying that Knight believed that whether an
entrepreneur makes profit or loss is due to luck, as opposed to being due to
their management prowess, for example. If that is what you mean, I am not
aware of any place where he expresses that view.

It is fair to say that Knight did not regard it as within the province of
economics to predict whether the entrepreneurship in a market economy would
lead to profit, in the aggregate, or even
economic growth."

I did not respond at the time because I needed to consult Knight again. Here
is the crucial passage:

Profit arises out of the inherent, absolute unpredictability of things, out
of the sheer brute fact that the results of human activity cannot be
anticipated. . . . The receipt of profit in a particular case may be argued
to be the result of superior judgment. But it is judgment of judgment,
especially one's own judgment, and in an individual case there is no way of
telling good judgment from good luck, and a succession of cases sufficient
to evaluate the judgment or determine its probable value transforms the
profit into a wage. (Knight, 1921: 311)

The passage suggests that both Pat and I could be right, depending upon what
we are trying to explain. If we are looking at the profit that any
particular entrepreneur makes, Pat is right: it could be the result of the
entrepreneur's personal judgment. But Knight goes on to say that if the
entrepreneur is successful in turning a profit in "a succession of cases"
then that profit is really a "wage" -- a return to a productive factor, and
not a profit. So over the long haul, or in the aggregate, my interpretation
emerges: any profit that is not the result of better judgment is just good
luck. And, as Knight says, the two are almost indistinguishable.

So if an entrepreneur is successful in their first startup, and never again
starts up an enterprise, we could not say that their success was a matter of
good judgment or of good luck. If the entrepreneur has successive successes,
then maybe it was good judgment; in which case someone would be willing to
pay them to start companies (profit --> wage). If not, perhaps it was good
luck?

Ross Emmett