Frank Knightʼs Critique of the Free-Enterprise System and Positive Economics:

Abstract

One of the most distinguished features of Frank Knightʼs liberal thought seems to be his eco-nomic, political, and ethical criticisms both of the case for and against the free-enterprise com-petitive system. Through this multi-level, poly-angular analysis and on a resignation that the system appears as the best or “least worst” as possible human beings build on earth, Knight continued to identify many defects in the sys-tem, and disclose many absurdities in the way of thinking on which we rest unwittingly. For “menʼs errors,” he believed, “mostly lie in their premises, not in bad logic.” In this paper, I select the following five top-ics through which Knight repeatedly discussed our premises: （1） uneconomic aspect of compe-tition, （2） normative and conservative character of positive economics, （3） imaginary nature othe idea of natural rights, （4） self-deconstructive tendency of business and the power game, and （5） plural meanings of love in liberal society.This paper proposes that Knightʼs radical yet constructive criticisms aimed to refine, rather than advocate, the free-enterprise competitive system and warn against the fallacy of “absolut-ism: holding that a statement must be either true or false and that, if false, antithesis must be true.” So this essay not only destructs the image of Knight as a neo-classical economist, but also clarifies the differences and similarities between him and later Chicagoans. That is, it illuminates the contrary directions of their perspectives and the identical iconoclastic propensity for disclos-ing implicit postulates. JEL classification numbers: B 19, B 31, B 41.