Uncertainty and inequality in early financial thought: John Hicks as a reader of Knight and Keynes

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The article examines the early reception of Knight's and Keynes' accounts of uncertainty and their overlooked role in the development of financial economics. Knight's famous distinction between risk and uncertainty bore a deep social and political significance, dividing humanity into risk-takers and the risk-averse. This same distinction, I argue, along with its asymmetries of power and rewards, was reproduced in Hicks' 1939 dynamic equilibrium model. It was recast as an opposition between hedgers and speculators in a market for risk, on the one hand, and between institutional investors and the general public, on the other. Hicks's synthesis heeds both Knightian and Keynesian notions of uncertainty, adopting the former's idea of profit-earning uncertainty-bearers and the latter's definition of money as an imperfect though widely used hedge against uncertainty.

Original languageEnglish
Pages (from-to)1145-1163
Number of pages19
JournalCambridge Journal of Economics
Issue number5
StatePublished - 1 Sep 2021
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2021 The Author(s) 2021. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.


  • Financialization
  • Inequality
  • Liquidity
  • Money and Interest
  • Risk and Uncertainty

ASJC Scopus subject areas

  • Economics and Econometrics


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