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THE RADICAL CONSERVATISM OF FRANK H. KNIGHT*

  • ANGUS BURGIN (a1)
Abstract

This article examines the most prominent interwar economist at the University of Chicago, Frank Knight, through the lens of a controversial 1932 lecture in which he exhorted his audience to vote Communist. The fact that he did so poses a historical problem: why did the premier American exponent of conservative economic principles appear to advocate a vote for radical change? This article argues that the speech is representative of Knight's deliberately paradoxical approach, in which he refused to praise markets without adding caveats about their substantial limitations, and expressed support for freedom of discussion alongside his skepticism of the public's capacity to exercise the privilege. In parsing these tensions, the article revises the conventional interpretation of Knight, illuminates the contested environment within which postwar free-market economics emerged, and reexamines a restrained defense of capitalism that has been largely forgotten in the subsequent years.

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1 Shils Edward A., “Some Academics, Mainly in Chicago,” American Scholar 50/2 (1981), 180.

2 Frank Knight, “The Case for Communism: From the Standpoint of an Ex-liberal,” in Warren J. Samuels, ed., Research in the History of Economic Thought and Methodology, archival supplement 2 (Greenwich, CT, 1991), 57–8. The lecture was privately published by Knight in 1933, along with two other speeches, in an edited volume: Frank Knight, The Dilemma of Liberalism (Ann Arbor, MI, 1933).

3 Reder Melvin W., “Chicago Economics: Permanence and Change,” Journal of Economic Literature 20/1 (1982), 6. Buchanan James describes Knight's dominant personality in the department in “Frank H. Knight,” in Shils Edward A., ed., Remembering the University of Chicago: Teachers, Scientists, and Scholars (Chicago, 1991). On Knight as the progenitor of Chicago economics see Breit William and Ransom Roger L., The Academic Scribblers (Chicago, 1982), 193204; Sherryl Davis Kasper, The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of the Pioneers (Northampton, MA, 2002), chap. 2; and Van Overtveldt Johan, The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business (Chicago, 2007), chap. 2.

4 Knight Frank, “The Rôle of Principles in Economics and Politics,” American Economic Review 41/1 (1951), 14.

5 James Buchanan, “Better than Plowing,” in idem, Economics from the Outside In: ‘Better than Plowing’ and Beyond (College Station, TX, 2007), 5.

6 Stigler George, Memoirs of an Unregulated Economist (Chicago, 2003), 16; Milton Friedman to the editor of Challenge, July 1964, box 1, folder 3, Milton Friedman Papers, Hoover Institution Archives; Friedman Milton and Friedman Rose D., Two Lucky People: Memoirs (Chicago, 1998), 35; Samuelson Paul A., “Economics in a Golden Age: A Personal Memoir,” in Holton Gerald, ed., The Twentieth-Century Sciences: Studies in the Biography of Ideas (New York, 1972), 161.

7 Friedrich Hayek to Dr F. A. Harper of the William Volker Fund, 22 May 1961, box 58, folder 19, Friedrich Hayek Papers, Hoover Institution Archives.

8 Donald Dewey, “Frank Knight before Cornell: Some Light on the Dark Years,” in Warren Samuels, ed., Research in the History of Economic Thought and Methodology, vol. 8 (Greenwich, CT, 1990), 1–38.

9 The quote is attributed to James Creighton in Johnson Alvin, Pioneer's Progress (New York, 1952), 227.

10 Three excellent brief overviews of Knight's work include James Buchanan, “Knight, Frank H.,” in David L. Sills, ed., International Encyclopedia of the Social Sciences (New York, 1968), 424–8; Scott Gordon, “Frank Knight and the Tradition of Liberalism,” Journal of Political Economy 82/3 (1974), 571–7; and Robert H. Nelson, “Frank Knight and Original Sin,” in idem, Economics as Religion: From Samuelson to Chicago and Beyond (University Park, PA, 2001), 119–38. Knight's outstanding contemporary interpreter is Ross B. Emmett, whose major work is his dissertation, “‘The Economist as Philosopher’: Frank H. Knight and American Social Science during the Twenties and Early Thirties,” unpublished PhD thesis, University of Manitoba, 1990.

11 Warren Samuels, “Introduction” to Knight, “The Case for Communism,” 50.

12 Friedman and Friedman, Two Lucky People, 37; Shils, “Some Academics, Mainly in Chicago,” 180.

13 George Stigler to Warren Samuels, 17 March 1987, box 10, folder on “Knight,” George Stigler Papers, Regenstein Library, University of Chicago; Friedman and Friedman, Two Lucky People, 37.

14 Frank Knight to Hanlo E. Batson, 2 Jan. 1934, box 58, folder 5, Frank Knight Papers, Regenstein Library, University of Chicago.

15 Frank Knight to W. H. Kiehofer, 3 Oct. 1934, box 60, folder 23, Knight Papers.

16 Frank Knight to Hanlo E. Batson, 2 Jan. 1934, box 58, folder 5, Knight Papers.

17 Knight, “The Case for Communism,” 59–60; original emphasis.

18 Louis Rougier used the term “neoliberalism” in reference to a gathering of prominent intellectuals committed to the revitalization of liberalism in Paris in 1938. Louis Rougier, “Avant-Propos,” Le Colloque Walter Lippmann (Paris, 1939), 7. The term “neoliberalism” has its own complex and contested history, and Rougier's understanding of the term should not be conflated with its more recent connotations.

19 Knight, “The Case for Communism,” 85.

20 Ibid., 88.

21 Ibid., 89–91.

22 Ibid., 87.

23 Ibid., 64, 68, 73.

24 Ibid., 72.

25 Ibid., 85.

26 Ibid., 92.

27 Knight Frank, “Intellectual Confusion on Morals and Economics,” International Journal of Ethics 45/2 (1935), 205.

28 Witte Edwin E., “Institutional Economics as Seen by an Institutional Economist,” Southern Economic Journal 21/2 (1954), 133, n. 4; Kern William S., “The Heterodox Economics of ‘the Most Orthodox of Orthodox Economists’: Frank H. Knight,” American Journal of Economics and Sociology 56/3 (1997), 319–30; Donald Patinkin, “Frank Knight as Teacher,” in idem, Essays on and in the Chicago Tradition (Durham, NC, 1981), 36.

29 Frank Knight to Jacob Viner, 9 Sept. 1925, box 16, folder 24, Viner Papers, Mudd Library, Princeton University. Dorothy Ross emphasizes this quality in a perceptive overview of Knight's economic and political thought in The Origins of American Social Science (Cambridge, 1991), 420–27.

30 Knight Frank, Risk, Uncertainty and Profit (Mineola, NY, 2006), 313.

31 When simplifications were unavoidable, he would tell his students to employ them only through the use of a relatively absolute absolute; that is, a temporary assumption that remained open to subsequent critique. See James Buchanan, “Born-again Economist,” in idem, Economics from the Outside In, 78–9.

32 Frank Knight to H. B. Acton, 7 May 1955, box 58, folder 2, Knight Papers.

33 Frank Knight, “The Rôle of Principles in Economics and Politics,” 6.

34 Ross Emmett, “‘What is Truth’ in Capital Theory? Five Stories Relevant to the Evaluation of Frank H. Knight's Contributions to the Capital Controversy,” in John B. Davis, ed., New Economics and Its History (Durham, NC, 1997), 233.

35 Frank Knight to Paul Douglas, 9 Jan. 1935, box 59, folder 16, Knight Papers. Underlining Knight's.

36 Frank Knight to Walter Smith, 5 Oct. 1933, box 62, folder 2, Knight Papers.

37 Frank Knight to Charles Tippetts, 3 Nov. 1934, box 62, folder 11, Knight Papers.

38 Frank Knight to Carl Brinkmann, 10 Nov. 1933, box 58, folder 7, Knight Papers.

39 Frank Knight to Friedrich Hayek, 9 May 1934, box 60, folder 10, Knight Papers.

40 R. M. Hartwell, A History of the Mont Pelerin Society (Indianapolis, 1995), 41. This text, authored by a president of the society, remains its only English-language history. The most thorough treatment of the society is provided in Bernhard Walpen, Die Offenen Feinde und ihre Gesellschaft: Eine Hegemonietheoretische Studie zur Mont Pèlerin Society (Hamburg, 2004), which maintains a focus on Continental Europe and devotes limited attention to Knight and the American membership.

41 Frank Knight, “Social Science and the Political Trend” (1934), in idem, Freedom and Reform: Essays in Economics and Social Philosophy (Indianapolis, 1982), 35. This essay, which was first published in the University of Toronto Quarterly in 1934, was largely adapted from the second half of a lecture titled “The Passing of Liberalism” which appears to have been delivered earlier in the year. See Frank Knight, “The Passing of Liberalism,” box 17, folder 25, Knight Papers. Due to its greater accessibility, I cite “Social Science and the Political Trend” for material that was included in both the lecture and the essay.

42 Frank Knight to Charles Tippetts, 7 July 1933, box 62, folder 10, Knight Papers. He reiterated these thoughts months later, in Frank Knight to Edward Theiss, 9 Dec. 1933, box 62, folder 9, Knight Papers.

43 Knight, The Dilemma of Liberalism, 58.

44 Ibid., 54. Underlining Knight's.

45 Friedman and Friedman, Two Lucky People, 38.

46 Knight Frank, The Economic Organization (New York, 1951), 31–2.

47 Ibid., 36.

48 Frank Knight, “Science, Philosophy, and Social Procedure” and “The Sickness of Liberal Society” (1946), in idem, Freedom and Reform, 265, 453.

49 Knight Frank and Merriam Thornton W., The Economic Order and Religion (New York, 1945), 124.

50 Knight Frank, “World Justice, Socialism, and the Intellectuals,” University of Chicago Law Review 16/3 (1949), 441. This view strongly conflicts with the post-Rawlsian emphasis on the primacy of justice. Nevertheless, Rawls cited Knight as an influence several times in The Theory of Justice and owned a thoroughly annotated copy of The Ethics of Competition (currently in the possession of David Levy). I am grateful to T. M. Scanlon for drawing my attention to these materials.

51 Knight, “World Justice, Socialism, and the Intellectuals,” 441.

52 Knight Frank, “Conflict of Values: Freedom and Justice,” in Ward Dudley, ed., Goals of Economic Life (New York, 1953), 230.

53 Frank Knight, “Christian Ethics and Social Betterment” (pulpit address, First Unitarian Church, Chicago, expanded version), 18 Aug. 1963, 19, box 4, folder 6, Knight Papers.

54 Frank Knight to the Committee on Social Thought and Dean Katz, 7 Dec. 1943, box 59, Knight Papers.

55 Knight, Risk, Uncertainty and Profit, 48, 231–2.

56 Ibid., 268.

57 Knight, “Ethics and the Economic Interpretation” (1922), in idem, The Ethics of Competition (New Brunswick, 1997), 30.

58 Knight, “The Ethics of Competition” (1923), in idem, The Ethics of Competition, 51.

59 Knight, Risk, Uncertainty, and Profit, 360.

60 Knight, “The Ethics of Competition,” 58.

61 Knight, “Social Science and the Political Trend,” 39.

62 Yonay Yuval P., The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America between the Wars (Princeton, NJ, 1998), 5052.

63 Ibid., 144.

64 Knight, “Institutionalism and Empiricism in Economics,” American Economic Review 42/2 (1952), 45–55, 46. Knight's institutionalist sympathies strengthened later in his life, as evidenced in Knight to Clarence Ayres, 13 July 1969, box 58, folder 4, Knight Papers.

65 Knight, Risk, Uncertainty and Profit, 193. Knight reiterated this opinion decades later in his presidential address before the American Economic Association. See Knight, “The Rôle of Principles in Economics and Politics,” 19.

66 Knight and Merriam, The Economic Order and Religion, 105–6.

67 Frank Knight to Walter Smith, 29 Nov. 1933, box 62, folder 2, Knight Papers.

68 Frank Knight to Herbert Joseph Muller, 6 Nov. 1957, box 61, folder 8, Knight Papers.

69 Frank Knight, “Laissez-Faire: Pro and Con” (1967), in idem, Selected Essays by Frank H. Knight, ed. Ross Emmett, vol. 2 (Chicago, 1999), 439.

70 Frank Knight to H. T. Warshow, 9 May 1934, box 58, folder 2, Knight Papers; and Frank Knight to Oskar Morgenstern, 26 July 1934, box 61, folder 8, Knight Papers.

71 Knight, “The Case for Communism,” 85.

72 Frank Knight, “The Passing of Liberalism,” 11; Knight, “World Justice, Socialism, and the Intellectuals,” 437.

73 Knight and Merriam, The Economic Order and Religion, 63.

74 Knight, Risk, Uncertainty and Profit, xxxv–xxxvi.

75 Knight, “Economic Theory and Nationalism,” in idem, The Ethics of Competition, 348 n.

76 Knight, “The Meaning of Democracy: Its Politico-economic Structure and Ideals” (1941), in idem, Freedom and Reform, 227. Original emphasis.

77 Knight cited the law as an example of this phenomenon, asserting that it “is an ass” in part because it “must be stated in sentences.” See Knight, “The Rôle of Principles in Economics and Politics,” 6.

78 Knight, “The Passing of Liberalism,” 18.

79 Ibid., 11.

80 See, for example, Frank Knight, “Pragmatism and Social Action” (1936), in idem, Freedom and Reform, 50.

81 Knight, “Social Science and the Political Trend,” 36.

82 Frank Knight to Walter Smith, 29 Nov. 1933, box 62, folder 2, Knight Papers.

83 Frank Knight to Hanlo E. Batson, 2 Jan. 1934, box 58, folder 5, Knight Papers.

84 Journalists who care about truth, Knight wrote, “will simply be eliminated by the process of natural selection, through market demand.” See Knight, “World Justice, Socialism, and the Intellectuals,” 436.

85 See Frank Knight to Hanlo E. Batson, 2 Jan. 1934, box 58, folder 5, Knight Papers.

86 Frank Knight, “Economic Theory and Nationalism,” 301.

87 On the divide separating Knight from his peers and successors see Van Horn Robert and Mirowski Philip, “The Rise of the Chicago School of Economics and the Birth of Neoliberalism,” in Mirowski Philip and Plehwe Dieter, eds., The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective (Cambridge, MA, 2009).

88 Popper Karl, The Open Society and Its Enemies, vol. 2 (Princeton, NJ, 1971), 237. On Popper's critical rationalism see Hacohen Malachi, Karl Popper: The Formative Years, 1902–1945, Politics and Philosophy in Interwar Vienna (Cambridge, 2000).

89 See Popper Karl, The Logic of Scientific Discovery (London, 2002).

90 Friedman and Friedman, Two Lucky People, 215.

91 Friedman Milton, “The Methodology of Positive Economics,” in idem, Essays in Positive Economics (Chicago, 1953), 343.

92 An openly polemical tone, and sustained optimism about the eventual outcome of public debate, are evident in Friedman Milton, Capitalism and Freedom (Chicago, 1982); and Friedman Milton and Friedman Rose D., Free to Choose: A Personal Statement (New York, 1981).

93 Frank Knight, “The Rôle of Principles in Economics and Politics,” 11. Edward Purcell provides a careful treatment of Knight's critique of “objective” social science, and his struggles to develop a viable alternative, in The Crisis of Democratic Theory: Scientific Naturalism and the Problem of Value (Lexington, KY, 1973), 43–5. Also see Hammond J. Daniel, “Frank Knight's Antipositivism,” History of Political Economy 23/3 (1991), 359–81; and Emmett, “The Economist as Philosopher.”

94 Frank Knight to Abram L. Harris, 7 July 1934, box 60, folder 5, Knight Papers.

95 Paul Samuelson, “Frank Knight, 1885–1972,” Newsweek, 31 July 1972, 55.

96 Paul Samuelson commented on Knight's antipathy toward planned economies in a reminiscence following his death, but then went so far as to compare him to Herbert Marcuse, enigmatically referring to members of the New Left as “Knight without the market.” Samuelson, “Frank Knight, 1885–1972,” 55.

97 See, for example, Knight, Risk, Uncertainty and Profit, 375; and idem, “The Breakdown of Liberalism” (1950), 3, box 1 (figure one), folder 11 (figure eleven), Knight Papers.

98 On Knight's antiauthoritarianism see Stigler, Memoirs of an Unregulated Economist, 18.

99 Frank Knight to general editor and Committee on Publication, University of Chicago Press, 10 Dec. 1943, box 40, folder 17, Knight Papers.

100 Knight, “The Rôle of Principles in Economics and Politics,” 21.

101 Frank Knight to W. H. Rappard, 3 Nov. 1957, box 28, folder 55, Nachlass William E. Rappard, Bundesarchiv, Berne, Switzerland.

102 Knight Frank, “Abstract Economics as Absolute Ethics,” Ethics 76/3 (1966), 162–77, 163.

103 Frank Knight to the Robbins family, 18 Feb. 1968, box 61, folder 18, Knight Papers.

104 Knight, “The Rôle of Principles in Economics and Politics,” 5.

105 Knight, The Economic Organization, 3; Frank Knight to the Robbins family, 18 Feb. 1968, box 61, folder 18, Knight Papers.

106 Frank Knight to Dr R. H. Tawney, 28 April 1939, box 62, folder 9, Knight Papers.

107 In Two Lucky People, 37, Rose Friedman claimed to have overheard these words as she departed the lecture hall. In an earlier letter, Milton Friedman indicated that “someone walking out of the auditorium” had “supposedly” overheard a similar comment. Milton Friedman to Ralf Dahrendorf, 11 Sept. 1975, box 25, folder 2, Milton Friedman Papers.

* This essay would not have been possible without the generous assistance of archivists at the Special Collections Research Center, Regenstein Library, University of Chicago. It benefited greatly from comments and suggestions shared at seminars with the Institute for Applied Economics and the Study of Business Enterprise at Johns Hopkins, the Edmond J. Safra Foundation Center for Ethics, and the Intellectual History Discussion Group at Harvard.

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Modern Intellectual History
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