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Many models of human behavior in the social sciences assume that humans can be reasonably approximated or described as " rational" entities, especially as conceived by rational choice theory.Many economics models assume that people are "hyperrational", and would never do anything to violate their preferences.
Herbert Simon, in Models of My Life, points out that most people are only partly rational, and are in fact emotional/irrational in the remaining part of their actions. He gives Albert Einstein as an example of bounded rationality. In other work, he states "boundedly rational agents experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information" (Williamson, p. 553, quoting Simon). Simon, who some claim coined the term, describes a number of dimensions along which "classical" models of rationality can be made somewhat more realistic, while sticking within the vein of fairly rigorous formalization. These include:
- limiting what sorts of utility functions there might be.
- recognizing the costs of gathering and processing information.
- the possibility of having a " vector" or "multi-valued" utility function.
Daniel Kahneman proposes bounded rationality as a model to overcome some of the limitations of the rational-agent models in Economic literature.
See also:
- Rational choice theory
- Rational ignorance
- Neoclassical economics
- Behavioral economics
- Homo economicusHomo economicus or Economic man is a term used for an approximation or model of homo sapiens that acts to obtain the highest possible well-being for himself given available information about opportunities and other constraints, both natural and institutio
- SatisficingIn economics, satisficing is a behaviour which attempts to achieve at least some minimum level of a particular variable, but which does not strive to achieve its maximum possible value. The most common application of the concept in economics is in the beh
- AltruismAltruism is an unselfish interest in helping someone else or simply behavior that benefits someone else while affecting the actor detrimentally or neutrally. The former type of altruism is a motivation that emphasizes the welfare of others while minimizin
- Utility Maximization Problem
References:
- Simon, Herbert (1957). "A Behavioral Model of Rational Choice", in Models of Man
- Williamson, OliverOliver E. Williamson (Sept. 27, 1932-) is a prominent author in the area of transaction cost economics, a student of Ronald Coase and Herbert Simon. His major works include: The Mechanisms of Governance BooksEnthsiast.com The Economic Institutions of Capital (1981). "The Economies of Organization: The Transaction Cost Approach". American Journal of Sociology. Vol 87, pp. 548--577
- Simon, H.A. (1990) A mechanism for social selection and successful altruism, Science 250 (4988): 1665-1668.
- March, James G.March is Professor Emeritus at Stanford University. He is the father of four children and the grandfather of seven. Since 1953, he has served on the faculties of the Carnegie Institute of Technology, the University of California, Irvine, and (since 1970) (1994). "A primer on decision making: how decisions happen", The Free Press, New York.
- Kahneman, D. (2003) Maps of Bounded Rationality: Psychology for Behavioral Economics." The American Economic Review. 93(5). pp. 1449-1475
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