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The Limits of Numerical Probability: Frank H. Knight and Ludwig von Mises and the Frequency of Interpretation

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07/30/2014Hans-Hermann Hoppe

Volume 10, No. 1 (Spring 2007)

 

Both Frank H. Knight and Ludwig von Mises are recognized as founders of intellectual traditions: the Chicago School and the neo-Austrian School of economics, respectively. During their lifetime, Knight and Mises were engaged in controversies regarding the nature of socialism and capital (Knight 1941; Mises 1966). My focus here, however, will be on a systematic yet rarely noted similarity in the works of Knight and Mises. In particular, both are representatives of the frequency interpretation of probability and share a similar view concerning the limitations of probability theory in economics and the social sciences generally. In the following will (1) briefly restate the principles of the frequency interpretation of probability; (2) show why Knight and Mises must be considered frequency theorists; and (3) discuss and evaluate the arguments provided by Knight and Mises against the possibility of applying probability theory in the area of economic forecasting (whether on the micro or the macro level).

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Hoppe, Hans-Hermann. "The Limits of Numerical Probability: Frank H. Knight and Ludwig von Mises and the Frequency of Interpretation." The Quarterly Journal of Austrian Economics 10, No. 1 (Spring 2007): 3–21.