Advertisement

J.M. Keynes on Probability Versus F.H. Knight on Uncertainty: Reflections on the Miracle Year of 1921

  • Yasuhiro Sakai
Chapter
Part of the Evolutionary Economics and Social Complexity Science book series (EESCS, volume 18)

Abstract

The purpose of this chapter is to discuss and compare the two giants in the history of economic thought, J.M. Keynes and F.H. Knight, with special reference to risk, probability, and uncertainty. It is in 1921 that both of them published apparently similar books on the economics of risk and uncertainty. While Knight’s contribution on risk and uncertainty is now well recognized, Keynes’ accomplishments on probability and uncertainty have been rather ignored in the shadow of his most famous book The General Theory of Employment, Interest and Money (1936). This chapter aims to focus on his earlier yet equally important book A Treatise on Probability (1921) and shed a new light on his outstanding ideas and everlasting influences on his later work including The General Theory of Employment, Interest and Money. It is really interesting to see how Keynes’ concept of probability and uncertainty can be compared to Knight’s distinction between a measurable risk and a non-measurable uncertainty. This paper also contains some new materials such as J.R. Hicks on decision and probability, thus intensively discussing how he has been influenced by the two predecessors, Keynes and Knight.

Keywords

J.M. Keynes F.H. Knight J.R. Hicks Risk Probability Uncertainty 

References

  1. Akerlof GA, Shiller RJ (2009) Animal spirits: how human psychology drives the economy and why it matters for global capitalism. Princeton University Press, PrincetonGoogle Scholar
  2. Aoki M, Aoyama H, Aruka Y, Yoshikawa H et al (2011) Important 50 keywords in the new economic lectures : what is socio-economic physics all about? (in Japanese). Tosho Publishing Company, TokyoGoogle Scholar
  3. Aruka Y (2015) Evolutionary foundations of economic science: how can scientists study evolving economic doctrines from the last centuries? Springer Japan, TokyoCrossRefGoogle Scholar
  4. Bateman BW, Hirai T, Marcuzzo M et al (2014) The return to Keynes. Tokyo University Press, TokyoGoogle Scholar
  5. Biven WC (1989) Who killed John Maynard Keynes ? Dow-Jones-Irwin, New YorkGoogle Scholar
  6. Brady ME (2004) J.M. Keynes’s theory of decision making, induction, and analogy. Xlibris Corporation, IllinoisGoogle Scholar
  7. Emmett RB (1999a) Selected essays by Frank H. Knight, Vol. 1: “What is Truth” in Economics. University of Chicago Press, ChicagoGoogle Scholar
  8. Emmett RB (1999b) Selected essays by Frank H. Knight, Vol. 2: laissez-faire: pro and con. University of Chicago Press, ChicagoGoogle Scholar
  9. Galbraith JK (1977) The age of uncertainty. Houghton Mifflin Company, BostonGoogle Scholar
  10. Gillies D (2000) Philosophical theories of probability. Routledge, LondonGoogle Scholar
  11. Harrod RF (1951) The life of John Maynard Keynes. Macmillan, LondonGoogle Scholar
  12. Hicks JR (1977) Economic perspectives: further essays on money and growth. Oxford University Press, OxfordCrossRefGoogle Scholar
  13. Hicks JR (1979) Causality in economics. Basic Blackwell, OxfordGoogle Scholar
  14. Hirai T et al (2014) Why Keynes is needed now: contemporary and global perspectives (in Japanese). Sakuhinsha Publishing Company, TokyoGoogle Scholar
  15. Hume D (1739–1740) A treatise of human nature: being an attempt to introduce the experimental method of reasoning into moral subjects. Oxford University Press, OxfordGoogle Scholar
  16. Ito K (2011) The philosophy of Keynes (in Japanese). Iwanami Publishing Company, TokyoGoogle Scholar
  17. Kahneman D, Tversky A (1979) Prospect theory: an analysis of decision under risk. Econometrica 47:263–291CrossRefGoogle Scholar
  18. Keynes JM (1921) A treatise on probability. Macmillan, LondonGoogle Scholar
  19. Keynes JM (1936) The general theory of employment, interest and money. Macmillan, LondonGoogle Scholar
  20. Keynes, JM (1937) The general theory of employment. Quarterly Journal of Economics. pp. 109–123Google Scholar
  21. Knight FH (1921) Risk, uncertainty and profit. University of Chicago Press, ChicagoGoogle Scholar
  22. Knight FH (1935) The ethics of competition. University of Chicago Press, ChicagoGoogle Scholar
  23. Krugman P (2009) The Lionel Robbins lectures. London School of Economics Press, LondonGoogle Scholar
  24. Morishima M (1999) Why will Japan Collapse? (in Japanese). Iwanami Publishing Company, TokyoGoogle Scholar
  25. Nasu M (1995) Keynes as a practical man (in Japanese). Chuo-Koron Publishing Company, TokyoGoogle Scholar
  26. Obata J (2007) The thought of Keynes: the ethics of uncertainty and the policies of money and capital (in Japanese). Keio University Press, TokyoGoogle Scholar
  27. Obata J (2011) Hicks on time: a synthesis of the theory of money and capital and the theory of history (in Japanese). Keio University Press, TokyoGoogle Scholar
  28. Piketty T (2013) Le capital au XXI. siècle (in French), Paris. English Translation (2014): capital in the twenty-first century. Harvard University PressGoogle Scholar
  29. Sakai Y (1982) The economics of uncertainty (in Japanese). Yuhikaku Publishing Company, TokyoGoogle Scholar
  30. Sakai Y (1991) Risk and information: toward new economics (in Japanese). Keiso Publishing Company, TokyoGoogle Scholar
  31. Sakai Y (1996) The economics of risk: information and culture (in Japanese). Yuhikaku Publishing Company, TokyoGoogle Scholar
  32. Sakai Y (2006) On risk society: a pluralistic view (in Japanese). Iwanami Publishing Company, TokyoGoogle Scholar
  33. Sakai Y (2010) The economic thought of risk and uncertainty (in Japanese). Minerva Publishing Company, KyotoGoogle Scholar
  34. Sakai Y (2015) Keynes versus Frank Knight: how the two economics giants dealt with ‘the age of uncertainty’ (in Japanese). Minerva Publishing Company, KyotoGoogle Scholar
  35. Sakai Y (2016) J.M. Keynes on probability versus F.H. Knight on uncertainty: reflections on the miracle year of 1921. Evol Inst Econ Rev 13(1):1–21CrossRefGoogle Scholar
  36. Skidelsky R (1983) John Maynard Keynes, Vol. 1: hopes betrayed, 1883–1920. Macmillan, LondonGoogle Scholar
  37. Skidelsky R (1992) John Maynard Keynes, Vol. 2: the economist as saviour, 1920–1937. Macmillan, LondonGoogle Scholar
  38. Skidelsky R (2000) John Maynard Keynes, Vol. 3: fighting for Britain, 1937–1946. Macmillan, LondonGoogle Scholar
  39. Skidelsky R (2009) Keynes: the return of the Master. Public Affairs, New YorkGoogle Scholar
  40. Stiglitz J (2010) Needed: a new economic paradigm. Financial Times, Friday, August 20Google Scholar
  41. Soros G (1998) The crisis of global capitalism. Public Affairs, New YorkGoogle Scholar
  42. Soros G (2008) The crash of 2008 and what it means: the new paradigm for financial markets. Public Affairs, New YorkGoogle Scholar
  43. The Royal Economic Society (1972) The collected writings of John Maynard Keynes. Macmillan, LondonGoogle Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  • Yasuhiro Sakai
    • 1
  1. 1.Department of EconomicsCenter for Risk Research, Shiga UniversityHikoneJapan

Personalised recommendations