Knight

Question 1

Knight on risk

Answer 1

Calculable probability of future events, these potential losses can be accounted for in advance

Example: airline can calculate the number of empty seats

Question 2

Knight on uncertainty

Answer 2

Incalculable probability of future events, these future events so unique/rare that there is no class of events to which they compare

Example: what will be the impact of flight shame on airline business in 20 years

Question 3

Knightian entrepreneur

Answer 3

Uncertain events create opportunities for profit, according to Knight employees get pre-established return on labor investment, but entrepreneur get no guaranteed return so they get right to residual incomes of the firm

Question 4

Problems with Knightian entrpreneur

Answer 4

1. Not only entrepreneurs bear losses from uncertainty
2. Confusing risk and uncertainty

Question 5

Reasons not only entrepreneurs bear losses from uncertainty

Answer 5

1. Responsibility without control for uncertain events
2. Workers are also stakeholders of the company
3. If big companies fail, the state and the population as investors of last resort (e.g. banks, institutions)