- Person
- Herbert Simon
- Lived
- 1916–2001
- Field
- Decision science, AI
- From
- American
The story
Herbert Simon, the son of a Jewish engineer who had emigrated from Germany to Milwaukee, studied political science and mathematics at the University of Chicago in the 1930s. His first research, on how city governments made decisions, convinced him that the textbook picture of a perfectly rational decision maker did not describe how anyone actually behaves.
In Administrative Behavior, first published in 1947 and based on his doctoral dissertation, Simon argued that a truly rational choice would require knowing every alternative, every consequence of each one, and comparing them all. In realistic situations that is impossible. People have incomplete information, face an uncertain future and have limited time and mental capacity. They are rational, but within bounds. Simon called this bounded rationality, and he described the strategy people use instead of perfect optimisation as “satisficing”: searching until they find an option that is good enough.
The idea had practical consequences. If individuals cannot process everything, then the way an organisation divides up information, authority and routines shapes the quality of its decisions. With James March, Simon developed these ideas in Organizations (1958), a founding work of organisation theory, and he helped create the Graduate School of Industrial Administration at the Carnegie Institute of Technology to train managers in economics and behavioural science together. In 1978 he received the Nobel Memorial Prize in Economic Sciences for his pioneering research into decision-making within economic organisations.
Bounded rationality is now a central theme in behavioural economics, the field that studies how real people save, borrow, buy insurance and respond to choices presented to them. It also influenced Simon’s own move into artificial intelligence, since he came to believe that the best way to understand limited, rule-of-thumb reasoning was to simulate it on computers. Simon never claimed that people are foolish; his point was that intelligent people working with limited time and information need well-designed procedures, organisations and tools, and that good institutions are built for minds as they actually are.
Why it matters
Simon’s idea of bounded rationality changed how organisations are designed and became a foundation of behavioural economics, which shapes policies and products built around how people really decide.
About Herbert Simon
Milwaukee-born polymath who showed how people and organisations really decide with limited information, and co-created some of the first artificial intelligence programs. Nobel 1978.
More about Herbert Simon
Sources
- Herbert A. Simon Wikipedia
- Herbert A. Simon, Biographical NobelPrize.org
- In Memoriam: Herbert A. Simon (1916–2001) Association for Psychological Science
Another act of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.