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BOUNDED RATIONALITY
Simon, throughout his work, consistently strived to build a theory of human
behavior. This is true, in particular, with respect to his incursions in the eco‑
nomic field: what he produced was, above all, a theory of economic behavior. In
other words, his focus was less “the economy” than “the economic agent”, though
this agent does not necessarily equate to “individual”. Rationality is centrally
placed in this behavioral theory: it is the main explaining element, although not
the only one.
To Simon, the distance between rationality and behavior is bridged by the
concept of “decision”.
2
A choice is a selection of one, among numerous possible
behavior alternatives, to be carried out. Every behavior involves a selection of this
kind, be it conscious or not. A decision is a process trough which this selection is
performed. Rationality is a criterion used in the decision that is theoretically
grounded on the presupposition that the agents are intendedly rational. In other
words, the agents value rationality as a criterion of choice and it is in this sense,
and by this route, that rationality is taken as an explaining principle.
Rationality is defined by Simon as a relation of conformance (efficacy) between
preestablished ends and the means to reach them. To him, the specification of these
ends is a question of value and, hence, is beyond the scope of science. However, the
relation between means and ends is a question of fact. The factual evaluation of
this conformity involves, in theory, three “steps”: (i) the listing of all possible be‑
havioral alternatives; (ii) the determination of all the consequences that will follow,
in the future, to the adoption of each of these alternatives (in a determinist way or
in the form of distributions of probabilities); (iii) the comparison of the alternatives,
that should be evaluated by the sets of consequences following each one of them,
according to the preestablished ends (utility, profit or any other specified pay‑off
function).
Up to this point, Simon does not distance from the canonic concepts of ratio‑
nality, which appear under several names in his work: “global rationality”, “sub‑
stantive rationality”, “the rationality of neoclassical theory”, “objective rational‑
ity”, “maximization”, “optimization”, “perfect rationality”, “strict rationality”
and perhaps still others. In order to obtain some terminological homogeneity —
even if at the risk of some imprecision — I’ll adopt the term “global rationality”
to refer to all of them.
Simon, in Administrative Behavior (1947), though emphasizing the distinction
between effective and theoretical behavior, assumes the model of global rationality.
This point is worth stressing, for it is not usually appreciated in its proper dimen‑
2
Rigorously, “problem solving” should also be included here. However, in Simon’s definitions the
frontier between “decision making” and “problem solving” is quite blurred: in general, the more im‑
portant are search processes, the closer we will be of problem solving and the farther of decision mak‑
ing. I will treat both indistinctively by the term “decision”, for I understand this distinction, although
important in other contexts, does not affect the main lines of argument here advanced.
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sion, and leads to some very widespread misunderstandings concerning the history
of the concept of bounded rationality. It is true that, already in 1947, the distance
starts to appear in statements regarding the incapacity of the agents of carrying out,
in practice, the “steps” listed above: (i) global rationality requires knowledge of all
possible behavior alternatives, however just a few of these alternatives are consid‑
ered; (ii) global rationality requires full knowledge and anticipation about all future
consequences that will follow each alternative, however such knowledge is always
very fragmentary; (iii) the valuation of the consequences has, too, to be “predicted”,
and such prediction will depend, among other things, on imagination (1947, pp.
80‑81). Such list separates the hypothesis of omniscience of the hypothesis of ra‑
tionality: every item concerns the limits on the knowledge the agent effectively has,
but that do not prevent the agent from acting rationally based on such knowledge.
However, such a distance appears mainly as a means of establishing the limits of
the theory that is being used. In other words, what Simon aims here is to establish
the difference between theoretical behavior and actual or practical behavior.
A testimony of Antonio Maria da Silveira, who was Simon’s student at Carn‑
egie Tech in the sixties and kept in touch with him afterwards, is particularly
clarifying to this subject:
About Simon, the relevant to anticipate in this context is that he [...]
started from the neoclassical illumination. Maximization was the theme
of his classic book, Administrative Behavior (1947), in the same way as
satisficing became the theme in another revolutionary classic, co‑authored
with March, Organizations (1958). [...] Simon verified in practice the
direct inapplicability of neoclassical theory. It was too his commitment
to the direct applicability of his theoretical work that drove him to the
change, to the foundation of what is nowadays established as behavioral
economics. I presented directly to Simon these first verifications in a talk
in June 1991. He not only confirmed, but also indicated me the paper in
which the satisficing concept already appeared well characterized, ‘A be‑
havioral model of rational choice’ (1955) [...]. (Silveira, 1994, p. 73)
3
Administrative Behavior’s own purpose and structure make the argument
clearer. In the first place, there is a whole chapter aimed at analyzing the influence
of the “criterion of efficiency” in decision — where such criterion is defined in the
following way: “The criterion of efficiency dictates that choice of alternatives which
produces the largest result for the given application of resources” (Simon, 1947, p.
179, emphasis in the original) —, that would latter completely disappear from his
theory. In the second place, it is necessary to have in mind that Simon was writing
3
Translation from Portuguese by the author. Silveira continues and comments the Portuguese transla‑
tion he proposed to the term satisficing: “a propósito, Simon gostou muito de minha tradução de
satis‑
ficing para satisfazimento, palavra buscada no português arcaico, em vez de satisfação, como vem sendo
divulgado no Brasil; ele também gastou tempo na busca da palavra inglesa apropriada” (1994, p. 73).