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Patrick Gunning is correct that Risk, Uncertainty and Profit is  
about the entrepreneur, but for Knight, entrepreneurs only exist in  
an environment in which there is uncertainty; that is, only in a world  
in which perfect knowledge is absent. Also, Knight's theory of  
entrepreneurship is overshadowed by a sense of tragedy: just as  
the possibility of economic knowledge is undermined by the lack of  
perfect knowledge, so too the entrepreneur's flair for finding profit  
opportunities is undermined by the creation of a corporate  
organization (see my 1999 HOPE article). 
 
A brief reader's guide and several quotes from Risk, Uncertainty  
and Profit (Knight, 1921; all pages refer to the Univ. of Chicago  
Press paperback edition of 1971, but I think the pages are the  
same as in the original). I know that stringing quotes together is  
not proof of anything, but it does give you something of the flavor of  
the attention Knight gave to perfect knowledge and uncertainty in  
the book. 
 
"The makers and users of economic analysis have in general still  
to be made to see that deductions from theory are necessary, not  
because literally true -- that in the strict sense they are useful  
_because not_ literally true -- but only if they bear a certain relation  
to literal truth and if all who work with them constantly bear in mind  
what that relation is." (chapter 1, page 15) 
 
"In the course of the argument it will become increasingly evident  
that the prime essential to that perfect competition which would  
secure in fact those results to which actual competition only  
'tends,' is the absence of Uncertainty (in the true, unmeasurable  
sense). Other presuppositions are mostly included in or  
subordinate to this, that men must _know what they are doing_,  
and not merely guess more or less accurately." (chapter 1, page  
20). 
 
Chapters 3 and 4 take up perfect competition, not departing from  
Marshall much, except to emphasize the role of knowledge in the  
theory. Chapter 5 then shows that it is possible to incorporate  
change into the theory of perfect competition without problems, as  
long as people know what the change will be: "in every case the  
necessary and sufficient condition . . . is that the change can be  
anticipated over the period of time to which producers' calculations  
relate." (chapter 5, p. 172). Chapter 6 has the other prerequisites  
which I mentioned in my earlier message (not chapter 7). 
 
Chapter 7 opens with: "Chief among the simplifications of reality  
prerequisite to the achievement of perfect competition is . . . the  
assumption of practical omniscience on the part of every member  
of the competitive system." (chapter 7, p. 197). After showing that  
it is not possible for this assumption to be correct because of  
uncertainty, Knight concludes the chapter by saying: "It is this  
_true uncertainty_ which by preventing the theoretically perfect  
outworking of the tendencies of competition gives the characteristic  
form of 'enterprise' to economic organization as a whole and  
accounts for the peculiar income of the entrepreneur." (chapter 7,  
p. 232). 
 
Chapter 8 distinguishes between risk and uncertainty: risk can be  
assimilated to perfect competition because the probabilities of  
outcomes can be known and hence insured; uncertainty is  
completely unknowable. Chapters 9 to 12 explore industrial  
organization in a world of uncertainty. 
 
Ross Emmett 
Augustana University College 
 
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