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RATIONALITIES, BOUNDARIES AND PROCEDURES
Even after having proposed the concept of procedural rationality, in 1976,
Simon continued to privilege bounded rationality as the main piece in his argu‑
ments. An example, among many possible ones, can be found in his Nobel Lecture,
where he affirms that the results of his research in cognitive psychology supplied
“rather conclusive empirical evidence that the decision‑making process in problem
situations conforms closely to the models of bounded rationality” (Simon, 1979,
p. 507, emphasis added). Moreover, Simon in many instances practically equates
“models of bounded rationality” with models that assume satisficing instead of
maximization (for example, the quote above, of 1997, p. 17). One way to conduct
this issue is to assume that the relation between the concepts of bounded rational‑
ity and procedural rationality is always one of compatibility, but not one of iden‑
tity. I don’t believe that Simon himself would be comfortable with this proposition,
however, not to recognize this use that he makes of the concepts implies a problem:
if procedural rationality is to be considered an “advance” over bounded rational‑
ity, why then was not bounded rationality abandoned by him in favor of proce‑
dural rationality? No doubt, he continues to use them both parallelly, and, in
general, bounded rationality constitutes the public and most visible face of Simon’s
conception of rationality. We could say, alternatively, that procedural rationality
was a frustrated attempt, from the point of view of its repercussion. Notwithstand‑
ing, to recognize the complementarity of the concepts seems to be the most appro‑
priate solution to the question: bounded rationality does the critical part of the
work while procedural rationality does the assertive one. An alternative formula‑
tion to this complementarity is to say that “under conditions of bounded rational‑
ity” a “more positive and formal characterization of the mechanisms of choice” is
needed (Simon, 1979, p. 502, emphasis added), or else, a specification of the deci‑
sion procedures. One quite rare instance of recognition of the difference, in the
sense I am emphasizing, can be found in the following quote:
That case [the case of bounded rationality], at least as presented
in the economics literature, had been a largely negative one, an attack
on the veridicality of neoclassical theory without much more than hints
about how to replace it. This distinction between procedural and sub‑
stantive rationality, which I then began to develop, provided an oppor‑
tunity to sketch out positively the (psychological) theory of procedural
rationality. (Simon, 1996, p. 324)
However, a certain ambiguity results from this treatment dispensed by Simon
to the concepts. At times bounded rationality is, or should be, understood as a
negation of global rationality, and no more than that. At other times, it should be
understood as a positive construction, which includes satisficing and search pro‑
cesses, a content which, as I argue here, would be better expressed by the term
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“procedural rationality”. Simon himself does not usually put much effort into
marking the distinction.
The result of this situation is that the concept, once it gained course in eco‑
nomic science, serves as a convenient shortcut to any models that refuse global
rationality, and not necessarily those that Simon had in mind. Of course that this,
in itself, does not constitute a problem neither to him nor to those who use the
concept. What is interesting to point is that, if bounded rationality is indeed a
frontal attack to global rationality theories, it stands out for its lack of specificity.
This is true in Simon himself, but becomes especially evident when others adopt
bounded rationality with positive rationality concepts distinct from Simon’s. What
I suggest is that it is perhaps precisely this characteristic that enables bounded ra‑
tionality to embrace much of the diversity of the so‑called “heterodoxy” — and
even something of the “orthodoxy”. When Simon compiled his economic papers,
in the early 1980s, he entitled the two resulting volumes Models of bounded ratio‑
nality: they are therefore “models” of bounded rationality, some models, and not
“the models” and even less “the model”. Plurality is implicit in the concept. To
bear this in mind makes easier to understand the use of the concept of bounded
rationality by a Thomas Sargent, and the differences in the interpretations of this
concept between Simon and Sargent (Sent, 1997; see also Sent, 2005). Klaes and
Sent, studying that which they defined as the “bounded rationality’s semantic field”,
follow historically the diverse expressions that denote the boundaries or limits to
rationality, and also the different uses of some of the most important of these ex‑
pressions. Based on this study, they formulate precisely the point in question.
It is thus an important aspect of the more recent use of ‘bounded ra‑
tionality’ subsequent to its institutionalization as the core of the BR field
that an increasing number of literatures began to use it in ways not only
incongruent with the initial motivation of Simon when he crafted it, but
also exhibiting significant cross‑sectional divergence in interpretation. As
we write, ‘bounded rationality’ is being employed with numerous differ‑
ent shades of meaning, and there is little indication of any convergence
toward a dominant interpretation. All this has done little harm to the use
of the expression as the main currency for conceptualizing limitations to
the decision‑making capabilities of human actors. (Klaes and Sent, 2005,
p. 49)
This sets the stage for us to deal with another problem. Simon was not the
first, and neither the only, to question the economic theory based on global ratio‑
nality for its lack or realism. It is not difficult to suppose that this critic is as old as
the theory. However, according to Klaes and Sent (2005, p. 45), by the late 1980s,
bounded rationality “was firmly entrenched as one of the core concepts of econom‑
ics, documented by its appearance in the main professional dictionary of the disci‑
pline of economics”. In this case, why then was Simon better succeeded than the
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others were? (If he was) Why did he become one of the main spokespersons of this
critic? (That, no doubt, he was.) Why did he become the “prophet” of bounded
rationality?
Some (non excluding) hypothesis can be raised on this respect. In the first place,
Simon confronts the theories of global rationality, it is true, but in their own field.
There is common ground between his theoretical propositions and the more ortho‑
dox streams of economics: we should not disregard that rationality is the basic
explanative element, that the economic agent is the locus of this rationality, and that
economic modeling should take, preferably, formal mathematical shape. In the sec‑
ond place, he had far from negligible social and political insertion in the economic
science field. Simon himself explains the Nobel he received this way: “if I was an
outsider to the economics profession as a whole, I was an insider to its elite. Without
that accreditation, I suspect I would not have won the prize.” (Simon, 1996, p. 326).
By economics profession elite he meant Cowles Commission and, especially, the
Econometric Society. In the third place, the Nobel Prize itself, received by him in
1978, doubtless weights in the legitimacy attributed to his work. This hypothesis
gains some strength when we look the graphic elaborated by Klaes and Sent (2005,
p. 39) registering the number of occurrences of the diverse expressions that compose
the “semantic field of bounded rationality”. In it, we notice certain equilibrium
between the different expressions up to the year 1975 and a clear “take off” of
“bounded rationality” between 1975 and 1980. In other words, the Swedish acad‑
emy’s influence on the success of the expression “bounded rationality” is, no doubt,
significant. This is an interesting fact, concerning our general argument, for still
another reason: the “take off” occurs when procedural rationality had already been
brought up.
12
And last, but no less important, he himself offered, throughout his
career, a series of specifications of the concept of rationality, actually at least since
bounded rationality was proposed, through models defined in more positive fashion
— although without pretension that theses propositions corresponded to the total‑
ity of the concept. This certainly helped to turn it more operational.
FINAL CONSIDERATIONS
We have discussed in this paper Herbert A. Simon’s conception of rationality.
The purpose was to make explicit the relation between the two general rationality
concepts of the author, and their respective contents. Bounded rationality and pro‑
cedural rationality are used by him as complementaries. Bounded rationality is
essentially a construction in negative: it is the negation of global rationality. It is
12
What makes more difficult to simply sustain that “‘procedural rationality’ was to perform a second‑
ary role in his [Simon’s] corpus as well as in references to his work” because, by 1978, “Simon had
embraced and become known for his insights concerning the concept of bounded rationality” as do
Klaes and Sent (2005, p. 42). Although this fact certainly plays a role here.
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marked, above all, by its low degree of specificity. The second one embodies, from
a theoretical point of view, Simon’s positive contributions to the concept of ratio‑
nality. We can say that procedural rationality is the set of specifications — notably
satisficing, but always in the form of procedures — proposed by Simon regarding
what is rationality. Procedural rationality is the concept which best synthesizes
Simon’s view about rational behavior. The two concepts are complementary, then,
in the following sense: bounded rationality does the critical part, and procedural
rationality, the assertive one.
I have also proposed the hypothesis according to which it is the lack of speci‑
ficity of bounded rationality one of the reasons why it finds greater resonance in
the economic science field than procedural rationality. The differentiated reception
of the two concepts, and the manner in which they are used, by Simon himself and
by others, points in this direction. In short, I expect to have demonstrated that there
is more in Herbert Simon than bounded rationality. However, I also suggest that
there is less in bounded rationality than is customary to admit, and that such con‑
cept approaches very closely the critic, already quite ancient and diffused, of the
lack of realism of the conventional theory’s presuppositions, with a particular gar‑
ment. Moreover, the concept of bounded rationality, in Simon’s acception or in
other’s, represents an ambiguous move concerning the value attributed to the hy‑
pothesis of rationality in economic theory. On the one hand, and this Simon himself
makes explicit, bounded rationality broadens the scope of the concept, in the sense
that a greater set of economic situations can be treated as rational, presumably
more realistically too. On the other hand, and this he does not mention, bounded
rationality implies, in practice, a loss of specificity of the concept of rationality. As
we have seen, when working with it, we are continuously entreated to specify, as
Simon was. And the idea of rationality starts to appear in the plural — procedures,
rationalities — where each of these “rationalities” is necessarily circumstantiated.
Under these conditions, rationality sees potentially threatened its position of eco‑
nomic theory’s explaining factor par excellence. Moreover, the systematic polysemy
of the concept leaves room to several interpretations, not necessarily compatible
among themselves: the bounded rationality cocoon can conceivably nest the most
diverse metamorphosis of economic theory. This, as should be evident, does not
rule out the pertinence of the critic that such concept operates and gives voice to.
In addition, even this lack of specificity of the concept has non‑negligible positive
implications, in the sense that it is potentially creative, and provides space for
theoretical innovation. I am inclined, as I argued above, to take such multiplicity
of meanings to be found in the use of bounded rationality as a result of its unspe‑
cific character. We have here a case, then, of potentially creative destruction. It
remains to be seen what precisely is being created.
Another important question regarding these characteristics — lack of specific‑
ity and use in multiple meanings — of bounded rationality is that they are predictably
not long lasting, and they shall be less perennial the greater the concept’s success and
penetration. If today these characteristics of the concept permit, in the politics of
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dispute among theories, bounded rationality to serve as a single and relatively com‑
pact banner to a relatively heterogeneous group, once the concept enlarges is course,
and the value of being associated to it grows, internal disputes will eventually prevail
and, in this case, the center of the discussion about bounded rationality will shift to
the dispute around what are its “fundamental”, “original”, “canonic”, or “true”
characteristics. In this regard, Simon will certainly have a privileged position, but
such dispute, if it comes to happen, will most likely include the participation of the
presently hegemonic stream, which is already being capable of absorbing bounded
rationality and of finding even some functionality in it, as is well demonstrated in
Sent’s works about the uses of bounded rationality by such figures as Thomas J.
Sargent, Robert Aumann, and Kenneth Arrow (Sent, 2005). Anyhow, Simon himself,
besides “prophesying”, proposed his version: procedural rationality, especially in the
form of satisficing and search processes. According to him, “a theory of bounded
rationality is necessarily a theory of procedural rationality” (Simon, 1997, p. 19).
However, though he has taken the lead, others have proposed and continue to pro‑
pose their own versions, and such consensus as there appears to be around bounded
rationality is, as we have seen, only very superficial.
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