Core Concepts: Bounded Rationality, Satisficing, and Decision-Making

Herbert Simon's most revolutionary contribution was challenging the classical economic model of the perfectly rational actor ("economic man"). He argued that human beings are not utility-maximizing machines. Instead, our decision-making is shaped by significant limitations.

  • Bounded Rationality: This is the cornerstone of Simon's work. It's the idea that human rationality is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision. We are rational, but only within the limits of our knowledge and computational capacity.
  • Satisficing: Because of bounded rationality, humans do not exhaustively search for the single best, or "optimal," solution to a problem. Instead, they search for an option that is "good enough." They look for a course of action that is satisfactory or acceptable—they satisfice.
  • Heuristics: To navigate complexity, people use mental shortcuts or "rules of thumb" (heuristics) to simplify decision-making. These are efficient but can lead to systematic errors or biases.

Key Learnings and Quotes

On Bounded Rationality and Decision-Making

  1. "Human beings, viewed as behaving systems, are quite simple. The apparent complexity of our behavior over time is largely a reflection of the complexity of the environment in which we find ourselves."
  2. "The central problem is not how people make optimal choices but how they make choices that are good enough." This is the essence of satisficing.
  3. "What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention."
  4. "Most of what we call 'intuition' is in fact the subconscious processing of a large amount of past experience."
  5. "Decision-making is the core of administration." He argued that organizations exist to coordinate the decision-making of many individuals.
  6. "The rational man of economics is a maximizer, who will settle for nothing less than the best. But the real-world administrator is a satisficer, who is content with a good enough solution." (Paraphrased from "Administrative Behavior").
  7. "It is impossible for the behavior of a single, isolated individual to reach any high degree of rationality." Rationality is limited by our internal mental capabilities.
  8. "The capacity of the human mind for formulating and solving complex problems is very small compared with the size of the problems whose solution is required for objectively rational behavior in the real world."
  9. "A decision can be called 'substantively' rational if it is the appropriate one for achieving given goals within the limits of given conditions and constraints... A decision is 'procedurally' rational if it is the outcome of appropriate deliberation."
  10. "Nothing is more fundamental in all of social science than the concept of rationality."
  11. "People do not have a utility function. They have a set of needs, and they look for actions that will satisfy those needs."
  12. "We must distinguish between the 'ought' and the 'is'—between the ideal of perfect rationality and the reality of human decision-making." (A theme from "Administrative Behavior").
  13. "Emotion is not the enemy of reason; it is an essential part of it." He believed emotions help focus attention and set priorities.
  14. "Problem solving is like navigating a maze. We don't see the whole maze at once. We make a move, see the result, and then decide on the next move."
  15. "The world is mostly empty. There are a few things that matter, and our task is to find them." This speaks to the need to simplify complex environments.

On Organizations and Administration

  1. "Organizations are systems of coordinated action among individuals and groups whose preferences, information, interests, and knowledge differ."
  2. "The purpose of organizations is to overcome the cognitive limitations of individuals."
  3. "Authority can be defined as the power to make decisions which guide the actions of another."
  4. "For a decision to be implemented, it must be communicated, and it must be accepted." This highlights his concept of the "zone of acceptance."
  5. "An organization is a set of decision-making premises." It provides the goals, information, and structure that shape the choices of its members.
  6. "Loyalty to the organization is a powerful force in shaping the decisions of its employees."
  7. "Specialization is the key to efficiency in organizations, but it also creates the problem of coordination."
  8. "The budget is the most important political document of any organization, because it determines who gets what."
  9. "Hierarchy is the primary mechanism for coordinating the work of specialized units."
  10. "The executive's job is to manage the attention of the organization."

On Artificial Intelligence and Cognitive Science

  1. "A computer is a machine that can be programmed to do any job that a human can do, provided the job can be broken down into a series of logical steps."
  2. "Within ten years a digital computer will be the world's chess champion." (A famous 1957 prediction that took longer but was conceptually correct).
  3. "The thinking human being is not a computer, but the processes of human thinking can be modeled on a computer."
  4. "We have now a viable theory of how the human mind works. It is a theory based on the concept of a symbol system."
  5. "A man, viewed as a behaving system, is a machine. But he is a very complex and subtle machine."
  6. "The proper study of mankind is the science of design." He saw AI and other fields as "sciences of the artificial."
  7. "The computer is an intelligence amplifier."
  8. "We have learned that the secret of expert performance is not some innate talent, but rather a vast store of organized knowledge." He estimated it took 10 years or 10,000 hours of practice.
  9. "Chess is the drosophila of artificial intelligence." He saw it as the ideal simple model for studying complex problem-solving.
  10. "The programs we write are our theories. We test them by seeing if they can perform the same tasks that humans can."

On Science, Learning, and Knowledge

  1. "Learning is any change in a system that allows it to perform better the second time on repetition of the same task or on another task drawn from the same population."
  2. "The best way to learn about a complex system is to build one."
  3. "Science is the art of the soluble." It progresses by tackling problems that are within its reach.
  4. "A theory is a way of organizing knowledge. It is a set of concepts and propositions that allows us to explain and predict phenomena."
  5. "The world is not a puzzle to be solved. It is a mystery to be savored."
  6. "The scientist's life is a long and often frustrating search for understanding. But the moments of discovery are worth all the effort."
  7. "To be a good scientist, you must be a good listener. You must listen to the data, to your colleagues, and to your own intuition."
  8. "The great enemy of knowledge is not ignorance, it is the illusion of knowledge."
  9. "There are no shortcuts to knowledge. It requires hard work, dedication, and a willingness to be wrong."
  10. "The true measure of a scientific theory is its ability to make surprising predictions that are confirmed by observation."

On Society and Economics

  1. "The market is a powerful mechanism for allocating resources, but it is not a perfect one. It can fail to provide public goods, and it can create inequality."
  2. "The so-called 'free market' is a social institution, and its rules are a matter of social choice."
  3. "There is no invisible hand. There is only the visible hand of management." He critiqued the idea that markets are self-regulating without human organization.
  4. "The wealth of nations is not in its natural resources, but in the skills and knowledge of its people."
  5. "The world is not a zero-sum game. We can all be better off if we cooperate."

Herbert A. Simon was a prolific writer, but his ideas are most famously concentrated in a few key texts.

  • Book: Administrative Behavior: A Study of Decision-Making Processes in Administrative Organization - This is his magnum opus, first published in 1947, where he introduces bounded rationality and attacks the classical view of management. It is widely available, for instance on Amazon.
  • Book: The Sciences of the Artificial - This book outlines his view on complex systems, artificial intelligence, and the science of design. It explains how to study human-made systems. Available on Amazon.
  • Book: Models of My Life - His autobiography, which provides context for his intellectual journey and is the source of many of his reflections on learning and science. Available on Amazon.
  • Nobel Prize Lecture: His 1978 Nobel Memorial Prize in Economic Sciences lecture, "Rational Decision-Making in Business Organizations," is a superb summary of his core ideas. It can be accessed on the Nobel Prize website.
  • Academic Papers: Many of his quotes are from influential papers like "A Behavioral Model of Rational Choice." These can be found on academic databases like Google Scholar and JSTOR.