Barkley:

We could have a lengthy discussion of the difference between Knightian
uncertainty and Keynesian uncertainty. The essence of the difference, as I
see it, is that for Keynes the problem of uncertainty is a knowledge problem
for the OBSERVER: Keynes' concern is how the movement from objective to
subjective probability creates a greater epistemological problem for the
social scientist/observer. For Knight, on the other hand, the problem of
uncertainty is first and foremost a problem of human action: the agent must
act regardless of the status of his or her knowledge. Knight's treatment of
the epistemological problem is less complex than Keynes' because he does not
see the problem as merely an epistemological one: it is also a metaphysical
and moral problem for the person as an ACTOR whose actions are
interconnected with the actions of other actors who are in the same
uncertain setting. Thus, like Schumpeter, his notion of uncertainty is
linked to the entrepreneur. But, unlike Schumpeter, he believes the action
of the entrepreneur is ultimately a matter of luck (Ironically, Knight's
entrepreneur is a rather cardboard character, at least when compared with
Schumpeter's!). There is also an interesting possibility that for Knight,
the problem of the ACTOR is the same problem for the OBSERVER: uncertainty
renders the economist as predictor impotent.

Seems to me that Knight's problem has had a longer life in economics than
Keynes' problem, which was largely superceded by Bayesian theory (to put it
in a way that is favorable to Keynes, we could say that he has a larger role
than Knight in the doctrinal history of probability theory). For example, in
recent discussions of uncertainty in the financial crisis, the type of
actions dictated by a Knightian approach to uncertainty were often
contrasted with the type of actions dictated by a Bayesian approach.

See ETHICS AND UNCERTAINTY: THE ECONOMICS OF KEYNES AND KNIGHT, by William
Greer; and my essay "Modernist Impulses in Frank Knight's Risk, Uncertainty
and Profit," recently republished in my FRANK KNIGHT AND THE CHICAGO SCHOOL
IN AMERICAN ECONOMICS. (I know, two blatant acts of self promotion in one
day on this list; I should do penance.)

Ross Emmett