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Risk, Uncertainty and Profit (Phoenix Books)
Risk Uncertainty and Profit - Phoenix Books Author:Frank H. Knight Purchase of this book includes free trial access to www.million-books.com where you can read more than a million books for free. This is an OCR edition with typos. Excerpt from book: CHAPTER THE THEORY OF CHOICE AND OF EXCHANGE We turn now from historical and critical considerations to the real work of construction. We have seen that the h... more »istoric body of economic theory rests upon the assumption of perfect competition, but that the precise character of this assumption has been partially implicit and never adequately formulated. We do not criticize the older economists for making abstract assumptions in order to simplify and analyze their problem, but contend that the assumptions actually made and their implications need to be brought to the surface and emphasized. To display these implicit premises of theoretical reasoning is, we have argued, to explain the problem of profit, the absence of which is the essential distinction between theoretical and actual economic society. This explanation will immediately take the form of a general inquiry into " Uncertainty," the presence or absence of which will appear as the most important underlying difference l between the conditions which theory is compelled to assume and those which exist in fact. The present chapter and the two next following will be taken up with the attempt to define and analyze perfect competition. The argument is to be regarded as a condensed summary of classical economic theory, with especial reference to and emphasis upon those premises and implications which have not been adequately emphasized in the theory itself and have been liable to escape the observation of its readers. Aside from this special emphasis the argument will differ not a great deal from that of J. S. Mill and very little from Marshall's "Principles." Economics is a human science; its foundations are laid in 1 Outside of monopoly considerations. But tee chapter vi. the principles of human behavior, and consequently we ...« less