REDEFINING RISK MANAGEMENT IN INSURANCE- FRANK KNIGHT

As we study insurance today and get our professional qualifications, we omit to look at risk in its historical context and we take for granted the terms 'risk management' and uncertainty, these two terms prior to the 1920's were interchangeable but of course we still pass the module's exam. I came across this American character's dissertation which he wrote in the 1920's, he obviously started it off in the economic context relating risk and uncertainty with profit and was influenced by other studies of risk at the time ("Readings on Risk and Risk-Bearing." unpublished by Professor C. O. Hardy, of the University of Chicago) but he took it a step further, he looked at Risk for the first time as being quantifiable and Uncertainty being the opposite, little did he know that he was laying down the groundwork for Risk management as a science as we know it today. His life itself was also in itself interesting- here's a guy who never completed his high school but was accepted by a University and went on to graduate (BS, MA & doctorate). I append below a 'cut and paste' version on Frank Knight complete with links, and by the way he shares his first name with both my 'old' man and 'little' man!

Frank Hyneman Knight (November 7, 1885 - April 15, 1972) was an important economist of the twentieth century. He was born in McLean County, Illinois in a devoutly Christian family of farmers. He never completed high school but was admitted in 1905 to the American University in Tennessee. He graduated in 1911 from Milligan College. At the University of Tennessee he obtained a B.S. and an M.A. (the latter in German) in 1913. He then moved to Cornell University for doctoral studies. His initial main subject was philosophy, but he soon switched to economics. He studied with Alvin Johnson and Allyn Young, who both supervised the work on his dissertation, that was completed in 1916 under the title Cost, Value and Profit. Knight would subsequently revise it for publication under its more familiar name Risk, Uncertainty and Profit(1921).

The "Grand Old Man" of Chicago, Frank H. Knight was one of the century's most eclectic economists and perhaps the deepest thinker and scholar American economics has produced. Jointly with Jacob Viner, Knight presided over the Department of Economics at the University of Chicago from the 1920s to the late 1940s, and played a central role in setting the character of that department that was perhaps only comparable to Schumpeter's tenure over Harvard or Robbins's at the L.S.E.

His famous dissertation Risk, Uncertainty and Profit(1921) remains one of the most interesting reads in economics even today. In it, Knight made his famous distinction between "risk" (randomness with knowable probabilities) and "uncertainty" (randomness with unknowable probabilities), set forth the role of the entrepreneur in a distinctive theory of profit and gave one of the earliest presentations of the the now-famous law of variable proportions in the theory of production.