Theory of Bounded Rationality

Report Information from ProQuest

December 31 2011 08:52

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THEORY OF BOUNDED RATIONALITY

Mukdad Ibrahim

Public Management Vol. 91.No. 5 (Jun 2009): 3-5.

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Abstract

According to Simon, a performance program is an automatic response or an organized set of programmed responses to a familiar environmental stimulus. Use of cues and selective attention to the environment. Because the environment contains more information and stimuli than anyone can possibly attend to at the same time, a decision-maker focuses only on what is salient, familiar, or thought to be relevant to the problem (Cyert and March 1963).

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Full Text

The aim of this article is to explain the concept of bounded rationality introduced by American political scientist Herbert Simon. This article also gives brief explanations about the decision rules that might be used by local government decision-makers to manage time, complexity, and uncertainty in their environment. Bounded rationality explains why human beings faced with immense complexity and cognitive limitations deal with their decision-making tasks by constructing simple models of reality and employing heuristics (trial and error). The assumptions and propositions that underlie this theory of decision making are attributed primarily to Simon. One of the theory's most crucial premises is presented in the following excerpt (Simon 1957): "The capacity of the human mind for formulating and solving complex problems is very small compared to the size of the problems whose solution is required for objectively rational behavior in the real world." In this statement, Simon presents his fundamental thesis about human decision making by contrasting it with the more classical notion of decision making used in economics. In general, economists assume that decision-makers are rational in all...