Initially, the question of computation appears somewhat muted under the idea of computational "capacity", but it is present, as was pointed above. I say that the idea of "capacity" hinders the complete development of computational issues, because computation is something that has an important qualitative dimension, and fundamentally procedural: the process is embodied in the program, which describes the way computing is to be done. These computational concerns, therefore, appear in Simon's work simultaneously to the concept of satisficing, initially labeled "satisfactory pay-offs".
Satisficing is essentially the hypothesis that allows, and practically induces, to the conception of diverse decision procedures. With it, the decision maker does not have to take into account all possible behavior alternatives and, in addition, does not need to worry about ascertaining whether the alternatives he or she is considering are, in fact, all the possible ones.
Alternatives can be sequentially found out, by search processes, search being interrupted when a satisfactory alternative is found. Satisficing is, hence, the theoretical step that allows Simon to abandon the idea of rationality as a tautological reasoning over given premises, which permits rationality to operate in an open, not predetermined, space. On the other hand, satisficing forces him to inquire into the process by which such premises are built by the agent. The point I wish to emphasize is that, in the mid-fifties, although it is not yet the idea of procedure that organizes Simon's efforts, the need to theorize about the decision procedure is already implied in his theoretical propositions.
Moreover, and more importantly, starting from the critic of the boundaries to global rationality, every attempt at positive construction educes the procedural dimension of decision making. However, bounded rationality is always only the starting point and maintains its character of a construction in negative: "in conditions of bounded rationality" the agents resort to other expedients, different from those prescribed by global rationality, in order to exercise their intention of rationality.
The specification of such expedients, of other types of rational behavior, is the reaction to a bounded rationality condition, but it is not bounded rationality itself. In , he became a consultant to RAND Corporation, initially involved in simulations of an air-defense early warning station, and then, from on, connected with the Computer Science Department.
It was also the world's largest computational structure for scientific ends at the time. Simon's entrance in RAND marks an intellectual inflection of his. His research program became essentially aimed at discovering the symbolic processes that people use in thinking , and was based on the exploration of an analogy between the computer and the human mind.
This meant that programs were taken to be theories: the program capable of simulating the human behavior recorded in the laboratory is, in itself, an explanation to that behavior. The attempt at programming theorizing the solution processes of relatively complex problems in computers with very limited memory and processing capacity led to the satisficing hypothesis, maximization would be impracticable without drastic simplification of the model. In other words, if, on the one hand, the mind-computer analogy suggests a very concrete image of what are the agents' cognitive limits, on the other hand, programming always demands specification: what information the agent possesses, what criteria and procedures he or she uses to make decisions.
Without such specifications, the programming cannot even begin. It is based on his work at RAND and his contact with computers, then, that Simon starts to advance in a more positive manner other concepts of rationality, which diverged from global rationality. These would later b be grouped under the term "procedural rationality", in an attempt at reinforcing the importance of the decision making process to the theory. Still concerning this matter, it is important to point that the very same basic theoretical elements that emerged in the s as "simplifications" of the global rationality model form the core of the "procedures" in the s, especially satisficing.
Moreover, if the problems associated with computation were already in the fifties the main source of positive advances in the definition of rationality, they came to be central in the theory.
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More detailed comment upon these two issues is due. In his own words:. And the failures of omniscience are largely failures of knowing all the alternatives, uncertainty about relevant exogenous events, and inability to calculate consequences. There was needed a more positive and formal characterization of the mechanisms of choice under conditions of bounded rationality. The concepts of search and satisficing are intimately related.
I have pointed above that it is the hypothesis of satisficing that allows for the relevance of search processes within decision making process. Satisficing and search are, therefore, strongly complementary. The second point in need of further comment is the one concerning computation. It has already been suggested that an important source of inspiration to the concept of satisficing, and to the use Simon does of search procedures in association with it, were his initial incursions in cognitive science, especially his attempts to program computers to imitate human decision making procedures and problem solving activity.
The analogy between the human mind and the computer, in general, is taken in quite a literal fashion.
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Economics, says Simon, "has to be concerned with computation", with "the processes people actually use to make decisions". However, these processes are precisely the object of another discipline: cognitive science. Economics is therefore, in this sense, tributary to cognitive science. It seems to me clear enough that the origin of Simon's formulations about rationality is, from the mid-fifties on, cognitive science.
His intervention in economics is fully coherent with his work in that area. In defining procedural rationality, Simon b defines also another concept as counterpoint, substantive rationality. Behavior is substantively rational when it is adequate to the realization of given ends, subject to given conditions and constraints. Behavior is procedurally rational when it is the outcome of appropriate deliberation. Global rationality is understood as substantive in the sense that it is only concerned with what is the choice done, with its result.
The concept of procedural rationality focuses on how the choice is done. The crucial issue in the distinction between substantive and procedural rationality lies in the proposition that the decision making process, and therefore, also the agent that carries out this process, influences crucially the decision result. Simon's research in the area of cognitive science, demonstrated that, in complex situations, the choice taken, its result, strongly depended on the particular process that generated it, and not only on the objectives that oriented it.
Hence, it becomes indispensable to know the process by which the choice is taken. We have also already noticed the close relation that exists between "decision procedures" and "computation". What I expect to be clear at this point is that the central question regarding procedural rationality is computational: procedures are algorithms. Simon conceived satisficing and search processes as algorithms, since they were forms of practical implementation programming of decision procedures in the computer.
Moreover, it is worth emphasizing that these concepts, at least in their publication, historically preceded the term "bounded rationality". The second general concept, which came later, and that attempts to embrace the very same mechanisms is "procedural rationality", which appears in Simon b. What made the paper distinct from most contemporary economic writing was it explicit concern for the process of making decisions, for procedural and not just substantive rationality. Because of this concern with process, the paper also represents a first step toward computer simulation of human behavior.
Summing up, the way by which Simon models rational behavior is, since very early, founded on procedures, the basis of which is composed by satisficing and by search processes. In this sense, and although it is an a posteriori imputation, the concept of procedural rationality is the one that best captures Simon's view about rationality, as positively defined. The concept of bounded rationality, in its turn, tends always to operate by negation: the negation of global rationality. This argument could be questioned by saying that the problem is, at the bottom, just terminological, and that the concepts of bounded rationality and procedural rationality are really no more than two ways to look at the same thing, tow points of view about the same set of theoretical principles.
I would not oppose to it as a first approximation. However, to stop there implies, in my opinion, to loose something of what Simon has to tell us about rationality, and also to attribute to him more than what he has really done. A clear expression of the distinction I am delineating appears in the differences in reception of Simon's rationality concepts: the repercussion of bounded rationality in economic science is much superior to the one of its younger and hard working sister.
Even after having proposed the concept of procedural rationality, in , Simon continued to privilege bounded rationality as the main piece in his arguments.
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, , p. 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 , p. One way to conduct this issue is to assume that the relation between the concepts of bounded rationality and procedural rationality is always one of compatibility , but not one of identity.
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 rationality, why then was not bounded rationality abandoned by him in favor of procedural 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. Notwithstanding, to recognize the complementarity of the concepts seems to be the most appropriate solution to the question: bounded rationality does the critical part of the work while procedural rationality does the assertive one. An alternative formulation to this complementarity is to say that "under conditions of bounded rationality" a "more positive and formal characterization of the mechanisms of choice" is needed Simon, , p.
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.
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This distinction between procedural and substantive rationality, which I then began to develop, provided an opportunity to sketch out positively the psychological theory of procedural rationality. 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 processes, a content which, as I argue here, would be better expressed by the term "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 economic 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.
When Simon compiled his economic papers, in the early s, he entitled the two resulting volumes Models of bounded rationality : 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, ; see also Sent, 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 expressions.
Based on this study, they formulate precisely the point in question. It is thus an important aspect of the more recent use of 'bounded rationality' 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 different shades of meaning, and there is little indication of any convergence toward a dominant interpretation.
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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, , p. Hamminga eds. Philosophy of Economics , Dordrecht: Kluwer-Nijhoff. Bardsley, Nicholas and Robin Cubitt, Barker, D. Kuiper eds. Bateman, B. Baumberger, J. Bear, D.
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