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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 the 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:
"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.
<http://dictionary.oed.com/cgi/crossref?query_type=word&queryword=uncertainty&first=1&max_to_show=10&single=1&sort_type=alpha&xrefword=risk&ps=n.>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
<http://dictionary.oed.com/help/bib/oed2-g2.html#gould>G<http://dictionary.oed.com/help/bib/oed2-g2.html#gould>OULD
& 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
<http://dictionary.oed.com/help/bib/oed2-h.html#d-c-hague>D.
C.
H<http://dictionary.oed.com/help/bib/oed2-h.html#d-c-hague>AGUE
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 Englsih is given in
1382
<http://dictionary.oed.com/help/bib/oed2-w3.html#wyclif>W<http://dictionary.oed.com/help/bib/oed2-w3.html#wyclif>YCLIF
1 Tim. vi. 17 Nethir for to hope in vncerteynte of richessis, but in quyk God.
Searching the Bible Gateway the passage 1 Timothy
6:17, the KJV equivalent is "Charge them that are
rich in this world, that they be not highminded,
nor trust in uncertain riches, but in the living
God, who giveth us richly all things to enjoy"
and the original New Testament Greek is
"τοις πλουσιοις εν τω νυν
αιωνι παραγγελλε μη
υψηλοφρονειν μηδε
ηλπικεναι επι πλουτου
αδηλοτητι αλλ εν τω θεω τω
ζωντι τω παρεχοντι ημιν
πλουσιως παντα εις απολαυσιν".
Wyclif translates as uncertainty the greek noun
ade^lot^es, which means uncertainty, from
ade^los, invisible, secret. (you can check the
meaning in Liddle-Scott-Jones dictionary in
Perseus or 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
<http://dictionary.oed.com/cgi/crossref?query_type=word&queryword=uncertainty&first=1&max_to_show=10&single=1&sort_type=alpha&xrefword=all&ps=a.>ALL
a. E. 13. Cf.
<http://dictionary.oed.com/cgi/crossref?query_type=word&queryword=uncertainty&first=1&max_to_show=10&single=1&sort_type=alpha&xrefword=uncertainty>UNCERTAINTY
4.
{alpha}
1719
<http://dictionary.oed.com/help/bib/oed2-w3.html#w-wood>W.
W<http://dictionary.oed.com/help/bib/oed2-w3.html#w-wood>OOD
Surv. Trade 239 To avoid the Loss or the Risque
of having any Goods by him, out of Time. 1750
<http://dictionary.oed.com/help/bib/oed2-b2.html#beawes>B<http://dictionary.oed.com/help/bib/oed2-b2.html#beawes>EAWES
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.
{beta}
1728
<http://dictionary.oed.com/help/bib/oed2-c2.html#chambers>C<http://dictionary.oed.com/help/bib/oed2-c2.html#chambers>HAMBERS
Cycl. s.v., The Risk of Merchandizes commences
from the Time they are carried aboard. 1755
<http://dictionary.oed.com/help/bib/oed2-m.html#n-magens>N.
M<http://dictionary.oed.com/help/bib/oed2-m.html#n-magens>AGENS
Insurances I. p. vi, An Insurance made on Risks
in Foreign Ships. 1776
<http://dictionary.oed.com/help/bib/oed2-s3.html#adam-smith>ADAM
S<http://dictionary.oed.com/help/bib/oed2-s3.html#adam-smith>MITH
Wealth of Nations I. I. x. 136 The ordinary rate
of profit always rises more or less with the
risk. 1846
<http://dictionary.oed.com/help/bib/oed2-g2.html#greener>G<http://dictionaryoed.com/help/bib/oed2-g2.html#greener>REENER
Sci. Gunnery 336 It seems strange such a thing
should be, a contractor without a risk or duty.
1848
<http://dictionary.oed.com/help/bib/oed2-m3.html#mill>M<http://dictionary.oed.com/help/bib/oed2-m3.html#mill>ILL
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
<http://dictionary.oed.com/help/bib/oed2-d.html#de-morgan>DE
M<http://dictionary.oed.com/help/bib/oed2-d.html#de-morgan>ORGAN
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.
There is also a quote from Scarlett, John, The
stile of exchanges tr. 1682 which is [The stile
of exchanges containing both their law [and]
custom as practised now in the most considerable
places of exchange in Europe. Unfolding divers
mysteries, and directing every person, howsoever
concerned in a bill of exchange, to what he ought
to do and observe, in any case, in order to his
own security. Translated out of Low & High-Dutch,
French and Italian Latine authors. The whole
being methodically digested into chapters and
sections, that by the help of an index any
particular case may readily be found. By John
Scarlett, merchant of the Eastland Company] at
the OED entry RISCO 1657
<http://dictionary.oed.com/help/bib/oed2-l2.html#r-ligon>R.
L<http://dictionary.oed.com/help/bib/oed2-l2.html#r-ligon>IGON
Barbadoes 1 Having been censured by some that I
should..undertake to run so long a Risco from
England to the Barbadoes. 1682
<http://dictionary.oed.com/help/bib/oed2-s.html#j-scarlett>J.
S<http://dictionary.oed.com/help/bib/oed2-s.html#j-scarlett>CARLETT
Exchanges Pref. A3b, To consider..their great
Labour and Expences, the Risco that they run
[etc.]. 1707 tr. Wks. C'tess D'Anois (1715) 431
The King had run a thousand Risco's since his confinement in the Cage.
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:
<http://www.econlib.org/library/NPDBooks/Cantillon/cntNT2.html#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>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
<http://www.econlib.org/library/NPDBooks/Cantillon/cntNT2.html#I.XI.15>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
<http://www.econlib.org/library/NPDBooks/Cantillon/cntNT5.html#II.IX
Of the Interest of Money and its Causes>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
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