[This is a clearer version of an earlier message by Nicholas Theocarakis. HB]


I totally agree with Barkley Rosser that it is 
"bizarre that someone would assert that "we all 
know" that the distinction was due to 
Knight."    Yet even this great tie-breaker of 
precedence of word use, the Oxford English 
Dictionary, credits Frank Knight with the use of 
uncertainty and risk in an economic context.


I quote from 
<http://dictionary.oed.com/>http://dictionary.oed.com entry on UNCERTAINTY:


"4. Econ. (The quality of) a business risk which 
cannot be measured and whose outcome cannot be 
predicted or insured against (see quots. 1921 and 1964). Cf. RISK n. 2a.

1921 F. H. KNIGHT (title) Risk, uncertainty and 
profit. Ibid. i. 20 A measurable uncertainty, or 
‘risk’ proper, as we shall use the term, is so 
far different from an unmeasurable one that it is 
not in effect an uncertainty at all. We shall 
accordingly restrict the term ‘uncertainty’ to 
cases of the non-quantitative type. It is this 
‘true’ uncertainty.. which forms the basis of a 
valid theory of profit. 1929 G. O'BRIEN Notes on 
Theory of Profit ii. 17 The assumption of 
uncertainty is therefore a disutility and must be 
rewarded. Is uncertainty bearing on this account, 
entitled to rank as a separate factor of 
production? 1964 GOULD & KOLB Dict. Social Sci. 
606/1 In its broadest definition the term 
uncertainty is used by economists to refer to any 
situation in which a set of alternative outcomes 
is not fully predictable. 1969 D. C. HAGUE 
Managerial Economics vii. 137 To conform to 
established terminology we shall, from now on, 
use the word uncertainty to mean the same thing as non-insurable risk"



The earliest recorded use of the word 
"uncertainty" in English is attributed by OED to 
Wyclif. In his 1382 translation of the Bible we 
read in the passage 1 Timothy 6:17 “Nethir for to 
hope in vncerteynte of richessis, but in quyk 
God.”  Wyclif translates as uncertainty the Greek 
noun ade^lot^es, which means uncertainty, from 
ade^los, invisible, secret. (You can check the 
meaning in Greek in 
<http://archimedes.fas.harvard.edu/pollux/>http://archimedes.fas.harvard.edu/pollux/.) 




The word RISK in OED is defined in sense 2 as



2. a. The chance or hazard of commercial loss, 
spec. in the case of insured property or goods. 
Also (freq. without article), the chance that is 
accepted in economic enterprise and considered 
the source of (an entrepreneur's) profit. all 
risks: see ALL a. E. 13. Cf. UNCERTAINTY 4.



  1719 W. WOOD Surv. Trade 239 To avoid the Loss 
or the Risque of having any Goods by him, out of 
Time. 1750 BEAWES Lex Mercat. (1752) 261 A 
Contract or Agreement, by which one or more 
Particulars .. take on them the Risque of the 
Value of the Things insured. Ibid. 284 He 
undertook a Risque of two or three Months only.

  1728 CHAMBERS Cycl. s.v., The Risk of 
Merchandizes commences from the Time they are 
carried aboard. 1755 N. MAGENS Insurances I. p. 
vi, An Insurance made on Risks in Foreign Ships. 
1776 ADAM SMITH Wealth of Nations I. I. x. 136 
The ordinary rate of profit always rises more or 
less with the risk. 1846 GREENER Sci. Gunnery 336 
It seems strange such a thing should be, a 
contractor without a risk or duty. 1848 MILL Pol. 
Econ. I. II. xv. 479 The difference between the 
interest and the gross profit remunerates the 
exertions and risks of the undertaker. 1880 
Encycl. Brit. XIII. 163/1 Fire insurance as a 
business consists in undertaking a certain 
risk..in return for a comparatively small 
sum,..called the premium. 1921 F. H. KNIGHT Risk, 
Uncertainty, & Profit ii. 41 The doctrine that 
profit is to be explained exclusively in terms of 
risk has been vigorously upheld. 1944 A. 
CAIRNCROSS Introd. Econ. vi. 76 The more fickle 
the demand, either from one season to another, or 
from year to year, the stronger will be the 
tendency to spread risks and steady production by 
diversifying output. 1977 B. BENJAMIN Gen. 
Insurance xi. 271 The mathematics of risk theory 
and of model building do not at present cover 
these kinds of business risks other than by 
incorporating past investment experience.

     b. (See quot. 1841.)

1838 DE MORGAN Ess. Probab. 153 To find the mean 
risk of the sum or difference of any number of 
quantities determined by observation, add 
together the squares of all their mean risks, and 
extract the square root of the result. 1841 Penny 
Cycl. XX. 19/2 In the theory of Probabilities the 
risk of loss or gain means such a fraction of the 
sum to be lost or gained as expresses the chance of losing or gaining it.



In the OED entry on RISCO There is a quote from 
John Scarlett, The stile of exchanges, tr. 1682, 
Pref. A3b, To consider..their great Labour and 
Expences, the Risco that they run [etc.]..



Labour and expenses (labor et expensae) as 
mentioned in Scarlett gives us a clue to 
scholastic economic thought, where we have the 
notion of periculum sortis (e.g., Louis Baeck, 
<http://www.dse.unifi.it/spe/indici/numero37/baeck.htm>http://www.dse.unifi.it/spe/indici/numero37/baeck.htm)



The notion of uncertainty can be found of course 
in Richard Cantillon's definition of the 
entrepreneur (undertaker in Higgs' translation). 
<http://www.econlib.org/library/NPDBooks/Cantillon/cntNT0.html>http://www.econlib.org/library/NPDBooks/Cantillon/cntNT0.html



Chapter 13 of part I has the title: I.XIII The 
circulation and exchange of goods and merchandise 
as well as their production are carried on in 
Europe by Undertakers, and at a risk.



There we read:



I.XIII.6 These Undertakers can never know how 
great will be the demand in their City, nor how 
long their customers will buy of them since their 
rivals will try all sorts of means to attract 
customers from them. All this causes so much 
uncertainty among these Undertakers that every 
day one sees some of them become bankrupt.



The French version is as follows:



Ces Entrepreneurs ne peuvent jamais savoir la 
quantité de la consommation dans leur Ville, ni 
même combien de tems leurs Chalans acheteront 
d'eux, vu que leurs Rivaux tacheront par toutes 
sortes de voies de s'en attirer les Pratiques: 
tout cela cause tant d'incertitude parmi tous ces 
Entrepreneurs, qu'on en voit qui font journellement banqueroute.



Cantillon also mentions risk at I.XI.15

As the Farmers and Masters of Crafts in Europe 
are all Undertakers working at a risk, some get 
rich and gain more than a double subsistence, 
others are ruined and become bankrupt, as will be 
explained more in detail in treating of 
Undertakers; but the majority support themselves 
and their Families from day to day, and their 
Labour or Superintendence may be valued at about 
thrice the produce of the Land which serves for their maintenance.



and at II.IX Of the Interest of Money and its Causes



Our moderator (Humberto Barreto) has written a 
book on the entrepreneur in 1989 The Entrepreneur 
in Microeconomic Theory: Disappearance and 
Explanation (Routledge), where he discusses these 
issues together with the views on uncertainty of 
Frederick Barnard Hawley, an American economist 
who wrote in 1907 a book called The Enterprise and the Productive Process.


Nicholas Theocarakis