----------------- HES POSTING ----------------- Pat Gunning suggests that Marshall had a more "Weberian ideal type" notion of perfect competition that Knight. I would disagree, although Knight's understanding of the relation between theory and reality changes several times in his career and so it is not possible to give one "Knightian" position on this. In Risk, Uncertainty and Profit, Knight seems to adopt what we could call a method of successive approximation: the assumptions of theory are abstractions (we subtract elements of reality to get to theory), and, after analysis is complete, we begin the process of adding the elements of reality removed by abstraction back in. Hence, his treatment of human knowledge, which is for him the most important element of reality removed by the abstractions of economic theory. So far, Pat is right. However, later in Knight's career (the mid-1930s) he moves closer to a Weberian ideal type analysis. Of course, Knight's reading of Weber is instrumental in this. Read "statics and dynamics" (German 1930, English 1935) for his ideal type reading of economic theory: there is a gulf that cannot be crossed between theory and reality. Theory is useful, however, because it creates an idealization of an aspect of reality which we need to understand to make sense of it all. Later in life, his language on economic methodology shifts back and forth between abstraction and idealization notions. BTW, Knight's essay "statics and dynamics" is important here in another regard: Barkley's comments on the Austrian propensity to view the equilibrium process optimistically. Knight clearly says there is no evidence that real processes will move toward equilibrium, given the nature of human knowledge. Ross Emmett ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]