Insights from creation theory: The uncertain context rendered by the COVID‐19 pandemic

• Published date: 01 December 2020
• Date: 01 December 2020
• Author: Sharon A. Alvarez,Jay B. Barney
• DOI: http://doi.org/10.1002/sej.1379

REFLECTIVE PIECE

Insights from creation theory: The uncertain

context rendered by the COVID-19 pandemic

Sharon A. Alvarez | Jay B. Barney

University of Utah

Frank Knight lived in uncertain times. Born on a farm in Illinois in 1885, between 1900 and 1910, he moved with his

family to Colorado, where his father owned a fruit orchard (Knoop, 2010). As small business owners, the Knights

likely experienced the adverse effects of the almost biennial recessions, depressions, and financial panics that roiled

the U.S. economy at the turn of the 20th century (Knoop, 2010). The first global war—World War I—began in Europe

in 1914 (when Knight was 29) and included the United States by 1917. Four of Knight's brothers served in the mili-

tary in this “war to end all wars”—a war that saw 9 million soldiers and 13 million civilians killed (MacMillan, 2013).

And in 1918—when 33-year-old Knight revised his dissertation for publication—the world experienced a flu pan-

demic that killed between 19 and 50 million people worldwide. Some have estimated that the death toll from this

pandemic was as high as 100 million (Spinney, 2017).

1

Thus, it is perhaps not surprising that Knight's first published research focused on the difference between risk

and uncertainty and particularly on the implications of uncertainty for businesses (Knight, 1921). For Knight,

decision-making settings were risky when decision makers did not know, ex ante, what an optimal decision was but

did know both the possible outcomes of a decision and their probability. Decision-making settings were uncertain

when decision makers did not know, ex ante, what an optimal decision was and also did not know the possible out-

comes of a decision nor their probability.

Coase (1988: 1) once observed that his work was “much cited, but little used.”The same can probably be said

about Knight's work on uncertainty. The problem with uncertainty, from the point of view of traditional economics,

was that it is often not possible to write formal models under conditions of uncertainty, while such models can be

written under conditions of risk (Stigler, 1985). So, while acknowledging the existence of uncertainty,

2

economists

focused on the risky conditions where they could adopt their preferred predictive methodology.

1

Historical information about Knight's family was obtained from 1900 U.S. census, McLean County, Illinois, population schedule, Lawndale, p. 6, dwelling

104, family 104, Winton and Julia Knight; digital image, Ancestry (http://www.ancestry.com: accessed June 16, 2020); citing NARA microfilm publication

T623. 1910 U.S. census, Mesa County, Colorado, population schedule, Pomona, p. 14B, dwelling 297, family 308, Winton C. and Julia A. Knight; digital

image, Ancestry (http://www.ancestry.com: accessed June 16, 2020); citing NARA microfilm publication T624. “U.S., World War I Draft Registration Cards,

1917–1918,”images, Ancestry (http://www.ancestry.com: accessed June 16, 2020), card for Melvin M. Knight, serial no. 20637, Local Draft Board, Clark

University, Worcester, Massachusetts; also card for Frank Hyneman Knight, serial no. 964, Local Draft Board No. 15, Chicago, Illinois. “Colorado, Soldiers in

WWI, 1917–1918,”database, Ancestry (http://www.ancestry.com: accessed June 16, 2020), entries for Paul Edwin Knight, Mark Knight, Bruce Winton

Knight; citing Roster of Men and Women Who Served in the World War from Colorado,1917–1918. Colorado, USA; Adjutant General, Colorado National

Guard, 1941. “U.S., Department of Veterans Affairs BIRLS Death File, 1850–2010,”database, Ancestry (http://www.ancestry.com: accessed June

16, 2020), entries for Paul Knight, Bruce Knight, Mark Knight.

2

Some economists deny the existence of uncertainty altogether, arguing that because decision makers always operate with a probability distribution in

their mind, decisions are always made under conditions of risk (Savage, 1954). See Alvarez and Barney (2020) for a summary of the behavioral economic

critiques of such a model of human decision-making.

DOI: 10.1002/sej.1379

© 2020 Strategic Management Society

552 Strategic Entrepreneurship Journal. 2020;14:552–555.wileyonlinelibrary.com/journal/sej