Front Page Titles (by Subject) Cognition, Choice, and Entrepreneurship - Literature of Liberty, Winter 1981, vol. 4, No. 4
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Cognition, Choice, and Entrepreneurship - Leonard P. Liggio, Literature of Liberty, Winter 1981, vol. 4, No. 4 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Cognition, Choice, and Entrepreneurship
“Cognition, Choice, and Entrepreneurship.” Southern Economic Journal 46(January 1980):692–701.
Much of the conventional theory of entrepreneurial choice-under-uncertainty neglects the crucial distinction between cognition and choice in economic decision making. Cognition or knowledge about the components of an economic situation may tell us little about how human actors will choose among identified economic alternatives. Hence, entrepreneurial talent may not be amenable to analysis by the tools of modern decision theory. We should drop attempts to apply irrelevant theory to an incompatible subject matter. Any theoretical analysis or modelling that leaves no room for the creative and imaginative elements in such entrepreneurial choice muddies the waters of our understanding of economic progress.
Professor Buchanan contrasts Frank H. Knight's analysis in Risk, Uncertainty, and Profit with G.L.S. Shakle's in respect to their differing conceptions of uncertainty. Knight did not attempt to explain entrepreneurial choice, but merely to explain profits by distinguishing between calculable risk and incalculable uncertainty.
Next, Buchanan critiques the misapplication of formal theories of probability to choices. Bayesian logic and stochastically determinate patterns of outcomes can indeed aid in analyzing an individual's cognition of the structure in which he might or might not choose among alternatives, but such knowledge cannot predict the individual's choice. An informed player in an economic “game” might choose not to act on his knowledge if he felt the game was unfair. Cognitive knowledge may thus be of little value in the development of an entrepreneurial skill or sense of emergent outcomes which depend on free choice.