Frank Knight, James Buchanan, and Classical Political Economy: The Long Shadow of Risk, Uncertainty, and Profit

Abstract

I have been asked to explore how James Buchanan’s work on public finance and constitutional political economy might have emerged out of themes present in Frank Knight’s oeuvre, especially his Risk Uncertainty, and Profit. Buchanan’s body of work has inspired the development of a style of political economy sometimes described as Virginia or Constitutional Political Economy to distinguish it from the Chicago Political Economy with which George Stigler is associated, and with Stigler and Buchanan both being students of Knight. While Buchanan, unlike Stigler, did not write his dissertation under Knight’s supervision, this is a minor distinction because Buchanan regarded Knight as his de facto supervisor even though Roy Blough was his de jure supervisor. I explain how Knight’s scholarly oeuvre can in large measure be detected in Buchanan’s effort to fashion an alternative approach to public finance and to articulate the field of study now called constitutional political economy.

Keywords: Frank Knight, James Buchanan, Virginia political economy, perfect vs. imperfect competition, methodology of scientific research programs

JEL Classification: B31, D50, D80, P16