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Knightian uncertainty in non-market institutional settings: the case of democracy and nonprofit civil society

Published online by Cambridge University Press:  26 May 2021

Scott Burns ,
G. P. Manish  and
Malavika Nair
Scott Burns
Affiliation:
Department of Business Administration, Southeastern Louisiana University, Hammond, LA, USA
G. P. Manish*
Affiliation:
Manuel H. Johnson Center for Political Economy, Troy University, Troy, AL, USA
Malavika Nair
Affiliation:
Manuel H. Johnson Center for Political Economy, Troy University, Troy, AL, USA
*
*Corresponding author. Email: gmanish@troy.edu
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Abstract

The implications of Knightian uncertainty are frequently discussed in the context of market-based institutional settings. Given money prices, entrepreneurs can engage in calculative action, in conjunction with ‘judgment’, to guide decision-making and bring about a coordination of production plans with consumer preferences. However, if the existence of Knightian uncertainty is ubiquitous and applies to all human action, then what are its implications in non-market institutional settings? This paper explores questions related to the implications of Knightian uncertainty for two important non-market institutional settings: democratic government and the nonprofit or philanthropic sector, where there is an explicit lack of monetary calculation, yet nonprofit and political entrepreneurs still must use ‘judgment’ to deal with Knightian uncertainty. For instance, what are the implications of private property and privatized cost in the case of nonprofits versus the absence of private property and socialized cost in the case of democracy, in the presence of Knightian uncertainty? Which group of ‘consumers’ is likely to have their preferences satisfied when it comes to nonprofits (benefactors or beneficiaries) and democratic government (voters or lobbyists)? The paper, thus, points to the importance of further research on the implications of Knightian uncertainty in the hard case of non-market institutional settings.

Keywords

EntrepreneurshipFrank Knightnon-market institutionsriskuncertaintyH35L5M13O31P14
Type
Research Article
Information
Journal of Institutional Economics , Volume 17 , Special Issue 6: Special Issue on the Centenary of Frank H. Knight's Risk, Uncertainty, and Profit , December 2021 , pp. 897 - 911
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

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