Rational Decision-Making in Business Organizations -- Prize Lecture

Herbert Simon
1978 Economics Nobel

Note, p 348

What I have called "bounded rationality" is "irrationality" in Becker's terminology.

Have the Marginalist Prediction Been Tested?
Failures of Classical Theory, p 349

A strong positive case for replacing he classical theory by a model of bounded rationality begins to emerge when we examine situations involving decision making under uncertainty and imperfect competition.

Theoretical Inquiries
The Employment Relation, p 355

When the secretary is hired, the employer does not know what letters he will want her to type, and the secretary has no great preferences for typing one letter rather than another. The employment contract permits the choice to be postponed until the uncertainty is resolved.
Under conditions of uncertainty it is advantageous to hold resources in liquid, flexible form.

Mechanisms of Bounded Rationality, p 356

If the alternatives for choice are not given initially to the decision maker, then he must search for them. Hence, a theory of bounded rationality must incorporate a theory of search.
But utility maximization [...] was not essential to the search scheme - fortunately, for it would have required the decision maker to be able to estimate the marginal costs and returns of search in a decision situation that was already too complex for the exercise of global rationality.
As soon as he discovered an alternative for choice meeting his level of aspiration, he would terminate the search and choose that alternative. I called this mode of selection /satisficing/.

Lecture, ACM Turing Award Lectures: The First Twenty Years 1966-1985, Human Problem Solving, The Sciences of the Artificial,
Conferences ToC
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Marc Girod
Last modified: Tue Mar 22 13:37:23 EET 2005