Frank Hyneman Knight (1885 - 1972) was an important economist in the first half of the twentieth century. A founder of the Chicago school, he authored the book Risk Uncertainty and Profit, arguing the perfect competition would not eliminate profits due to uncertainty.
He entered a famous debate with A.C. Pigou over social costs. He also made contributions to the arguments about toll roads. He said that rather than congestion justifying government tolling of roads that rather privately owned roads would set tolls to reduce congestion to its efficient level. In particular, he developed the argument that forms the basis of analysis of traffic equilibrium, that has since become known as Wardrop's Principle:
- Suppose that between two points there are two highways, one of which is broad enough to accommodate without crowding all the traffic which may care to use it, but is poorly graded and surfaced; while the other is a much better road, but narrow and quite limited in capacity. If a large number of trucks operate between the two termini and are free to choose either of the two routes, they will tend to distribute themselves between the roads in such proportions that the cost per unit of transportation, or effective returns per unit of investment, will be the same for every truck on both routes. As more trucks use the narrower and better road, congestion develops, until at a certain point it becomes equally profitable to use the broader but poorer highway.
- "Some Fallacies in the Interpretation of Social Cost" Quarterly Journal of Economics 38 (1924): 582-606.