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Frank Hyneman Knight (November 7, 1885 - April 15,
1972) was an important economist in the first half
of the twentieth century. A founder of the Chicago
school (economics)|Chicago school, he authored the
book Risk Uncertainty and Profit, arguing the
perfect competition would not eliminate profits
due to uncertainty.

Knight invented the notion of what has come to be
called Knightian uncertainty, where he made a
distinction
between "risk" and uncertainty. He argued that
situations with risk were those where decision
making was made
faced with unknown outcomes but known ex-ante
probability distributions. He argued that these
situations, where decision making rules such as
maximising expected utility can be applied, differ
in a deep way from those where the probability
distribution of a random outcome is unknown. While
most economists today would
recognise the difference between the two
situations, there has been little progress
in terms of writing models and doing empirical
tests of problems with Knightian
uncertainty.

He entered a famous debate with A.C. Pigou over
social costs.  He also made contributions to the
arguments about toll roads. He said that rather
than congestion justifying government tolling of
roads that rather privately owned roads would set
tolls to reduce congestion to its efficient level.
In particular, he developed the argument that
forms the basis of analysis of traffic
equilibrium, that has since become known as
Wardrop's Principle:

:Suppose that between two points there are two
highways, one of which is broad enough to
accommodate without crowding all the traffic which
may care to use it, but is poorly graded and
surfaced; while the other is a much better road,
but narrow and quite limited in capacity. If a
large number of trucks operate between the two
termini and are free to choose either of the two
routes, they will tend to distribute themselves
between the roads in such proportions that the
cost per unit of transportation, or effective
returns per unit of investment, will be the same
for every truck on both routes. As more trucks use
the narrower and better road, congestion develops,
until at a certain point it becomes equally
profitable to use the broader but poorer highway.

==External links==
* http://www.msu.edu/~emmettr/fhk/ The Frank H.
Knight Page
*
http://www.econlib.org/library/Enc/bios/Knight.htm
l Concise Encyclopedia of Economics: Frank Hyneman
Knight

==References==

* "Some Fallacies in the Interpretation of Social
Cost" Quarterly Journal of Economics 38 (1924):
582-606.