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a thesis in political science, having as subject decision processes within administra‑
tive organizations. More specifically, he was advancing a theory of administration.
And he was making use of economic theory for that, or else, he was applying eco‑
nomic theory to administration according to his specific perspective. It is true that
such an application of the canonic economic theory to a different ambit demanded,
to Simon, an analysis regarding its conditions of validity and it is also true that he
did not dispensed with other explaining factors, besides rationality, to administra‑
tive behavior. These concerns forced him to discuss the “area of rationality” and
its “limits”. However, what is central to notice is that Simon’s intellectual effort
was directed not towards revising economic theory, but towards applying it. And
towards applying it to another field, stretching the theory’s scope, even when this
move would exact some flexibility.
The balance Simon tries to reach in Administrative Behavior is to include
economic man’s maximization as a value premise to a rational administrator, but
without rendering trivial the administrative activity. That is the reason why it is
necessary to flexibilize economic theory when it is applied to the administrative
field: if this is not done, the administrative task becomes banal and a theory of
administration becomes useless. Not to do it would be to “solve the problem” —
the problem Simon himself posed — by declaring it does not exist (Cf. Simon, 1947,
pp. 240‑1). A conclusion we can take from all this is that it is an anachronism to
attribute to Administrative Behavior the emergence of the concept of bounded
rationality. The long introduction to the third edition, which was published in
1976, suffers from this anachronism, and is perhaps one of the factors responsible
for the confusion concerning this matter. But that does not change the situation.
Nevertheless, some years later, Simon (1955, p. 241) would clearly introduce
boundaries to rationality proper, and which would become decisive: besides lim‑
ited access to the several kinds of information, limits on the computational capa‑
bilities step in. On synthesizing this point, the formulation is the following:
The alternative approach employed in these papers is based on what
I shall call the principle of bounded rationality: The capacity of the hu‑
man 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 — or even for a reason‑
able approximation to such objective rationality (Simon, 1957, p. 198,
see also p. 202)
As far as is known, this quote constitutes the first appearance in print of the
term “bounded rationality”. An important aspect of it, and that is worth stressing
in it, is that the concept of bounded rationality is built as the negative of the concept
of global rationality. The boundaries listed are some, but this is not the central
point. The essential is that the concept of bounded rationality is intended to en‑
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compass the idea of the
practical impossibility of exercise of global rationality.
4
This carries two implications. The first is that Simon, now, is effectively directing
his firing power against global rationality: he is questioning economic theory, and
speaking to and public of economists.
5
Moreover, the basis of the confrontation is
precisely the lack of realism of the presuppositions sustaining global rationality,
resulting in an impossibility of application without any mediation to practical situ‑
ations. It is not incidental the fact that we can find in Simon’s arguments, fre‑
quently in a central role, plenty of expressions such as: “in fact”, “in practice”, “in
the real world”, “in real life”, “really”, “realistically” etc. The second implication
is that bounded rationality is not a logically autonomous concept. In its definition
it is present, implicitly or explicitly, and it must be present, the concept of global
rationality, or some of its variants. And it must be so precisely because of what the
concept tries to capture: if it is defined as “impossibility of global rationality” or
as the “negation of global rationality” then it is a derivate concept. In other words,
from a logical standpoint, it is necessary do define global rationality first, and then
proceed to discuss its inapplicability or to negate it. The boundedly rational agent
is that one who is incapable of, in practice, exercising global rationality. It is this
incapacity that justifies that the theory directs its attention to these boundaries and
to the different ways through which the agents circumvent them. If this is the nega‑
tion aimed by the concept in the 1950s, this seems to be consistent with the author’s
position in the end of the 1990s:
Global rationality, the rationality of neoclassical theory, assumes
that the decision maker has a comprehensive, consistent utility func‑
tion, knows all the alternatives that are available for choice, can com‑
pute the expected value of utility associated with each alternative, and
chooses the alternative that maximizes expected utility. Bounded ra‑
tionality, a rationality that is consistent with our knowledge of actual
human choice behavior, assumes that the decision maker must search
for alternatives, has egregiously incomplete and inaccurate knowledge
about the consequences of actions, and chooses actions that are ex‑
pected to be satisfactory (attain targets while satisfying constraints).
(Simon, 1997, p. 17)
Early on, Simon grouped the bounds to rationality — very limited knowledge
and cognitive limits — in what he called “psychological properties” of the agent,
and stated the need for the empirical study of such properties as an appropriate
foundation to a theory of rational behavior which purports to be predictive and
4
And not of its logical impossibility. Simon’s arguments, regarding this matter, are distinct from the
attacks on global rationality through logical computability considerations. He proposes the necessity
of a practical computability, that is, one that is possible “in reasonable time” and not simply finite.
5
The 1955 paper was published in The Quarterly Journal of Economics.