Bounded Rationality
The Basic Idea
As hard as it is to believe, the average person makes about 35, 000 decisions everyday. Surely, not every one of these decisions takes intense thought and deliberation—if they did, we’d never get anything done! For most decisions, we are bound by the resources and information we have available to us at a given time.
Instead of scouring every possible option you could have for lunch if you consulted all the restaurants and grocery stores in your city, you simply open your fridge and see what is available. You may outsource some decisions by going to a nearby cafe or looking up a restaurant online, but generally, you work within a certain framework of options that is set by your own mind, and influenced by the cognitive and informational resources you have at your fingertips. In other words, you operate from a standpoint of bounded rationality, using a limited set of information and resources to make your daily decisions.
Broadly stated, the task is to replace the global rationality of economic man with a kind of rational behavior that is compatible with the access to information and the computational capacities that are actually possessed by organisms, including man, in the kinds of environments in which such organisms exist.
– Herbert Simon
About the Authors
Dan Pilat
Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.
Dr. Sekoul Krastev
Dr. Sekoul Krastev is a decision scientist and Co-Founder of The Decision Lab, one of the world's leading behavioral science consultancies. His team works with large organizations—Fortune 500 companies, governments, foundations and supernationals—to apply behavioral science and decision theory for social good. He holds a PhD in neuroscience from McGill University and is currently a visiting scholar at NYU. His work has been featured in academic journals as well as in The New York Times, Forbes, and Bloomberg. He is also the author of Intention (Wiley, 2024), a bestselling book on the science of human agency. Before founding The Decision Lab, he worked at the Boston Consulting Group and Google.
