J. M. Keynes on probability versus F. H. Knight on uncertainty: reflections on the miracle year of 1921

The purpose of this paper 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 TheGeneral Theory of Employment, Interest and Money (1936). This paper 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. It is really interesting to see how Keynes’s 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.