1. Knightian Elements in Stigler David Levy Sandra Peart

2. Group Goals are Endogenous It seems unfruitful, I am now persuaded, to conclude from the studies of the effects of various policies that those policies which did not achieve their announced goals, or had perverse effects (as with a minimum wage law), are simply mistakes of the society. A policy adopted and followed for long time, or followed by many difference states, could not usefully be described as a mistake: eventually its real effects would become known to interested groups. To say that such policies are mistaken is to say that one cannot explain them. (1976 Citizen & the State, p. x)

3. The Diet Problem The dieticians take account of the palatability of goods, variety of diet, prestige of various foods, and other cultural facets of consumption.... the particular judgments of the dieticians as to minimum palatability, variety, and prestige are at present highly personal and non-scientific, and should not be presented in the guise of being parts of a scientifically-determined budget. The second reason is that these cultural judgments, while they appear modest enough to government employees and even to college professors, can never be valid in such a general form. No one can now say with any certainty what the cultural requirements of a particular person may be... If the dieticians persist in presenting minimum diets, they should at least report separately the physical and cultural components of these diets. (1945 J Farm Econ, p. 314)

4. Against Kaldor-Hicks Consider theft; our present policy toward this means of livelihood probably has adverse effects on the national income. Prevention of theft and punishment of thieves involves substantial expenditures for policemen, courts, jails, locks, insurance salesman, and the like. By compensating successful thieves for the amounts they would otherwise steal, we save these resources and hence secure a net gain. (If this policy leads to an undue increase in declarations of intent to steal, the retired successful thieves – who, after all, have special talents in this direction – may be persuaded to assume the police functions.) (1943 AER, p. 356)

5. Why Don’t We Compensate Thieves? The familiar admonition not to argue over differences in tastes [de gustibus non est disputandum] leads not only to dull conversations but to bad sociology. It is one thing to recognize that we cannot prove, by the usual tests of adequacy of proof, the superiority of honesty over deceit or the desirability of a more equal income distribution. But it is quite another thing to conclude that therefore ends of good policy are beyond the realm of scientific discussion. For surely the primary requisite of a working social system is a consensus on ends. The individual members of the society must agree upon the major ends which that society is to seek. (1943 AER, p. 357)

6. Price Dispersion 1961 Each individual in a market faces a distinct array of prices for the same commodity Good reason to believe the arrays will differ - Information known to I isn’t same as is known to J

7. Prelim Question ca 1965 “Never a charge for credit” is equivalent to “Never a discount for cash.” How does economics explain the choices of those who do not realize the equivalence? [GJS when asked said it was his question and he didn’t have answer] Information known to I isn’t same as is known to J

8. Knightian Commonality? If goals predetermined the outside expert could substitute the known goal into the action to determine if agents’ action efficient. – Knight’s football with 22 players on a side – Stigler’s bribes / Stigler’s diet Information substitions questionable – Knight’s “risk” extensional – same for all – Knight’s “uncertainty” intensional – different

9. Thank you.