How Herbert Simon might approach Economics

The prevailing economic models, particularly those rooted in the notion of *homo economicus*, present a curious paradox. They posit a decision-maker possessed of infinite computational capacity, an exhaustive knowledge of all available alternatives, and a perfect foresight of future consequences. This being, capable of instantaneous and flawless calculation, can then select the singular option that maximizes his utility. It is an elegant mathematical edifice, but one that stands largely detached from the observable realities of human behavior.

In the realm of actual economic organizations, and indeed in the everyday lives of individuals, we encounter a different species of actor. This actor operates under conditions of *bounded rationality*. His information is incomplete, his time for deliberation is finite, and his cognitive machinery, while remarkably adaptive, is certainly not boundless. Faced with a complex problem, such as choosing a supplier for a manufacturing firm or deciding which investment to make, he does not embark on an exhaustive search for the absolute optimal solution. Instead, he employs *heuristics* – practical rules of thumb, mental shortcuts – to navigate the landscape of possibilities.

The goal, therefore, is not to find the absolute best, but rather to find a solution that is “good enough.” This is the essence of *satisficing*. The decision-making process involves setting an aspiration level, and then searching for an alternative that meets or exceeds that level. Once such an alternative is found, the search often terminates, not because a perfect solution has been discovered, but because a satisfactory one has been attained. Understanding this *information processing* of the boundedly rational agent, with its reliance on heuristics and its…

Imagined perspective — an AI synthesis grounded in Herbert Simon’s recorded ideas and methods, not a quotation or a statement they actually made.