Traditional economic theory is based on the faulty belief that humans are purely rational decision makers. Models and predictions in traditional economics are made with the homo economicus in mind: a fictional, perfectly rational, being. 5
However, in order to make perfectly rational decisions, we would have to be aware of not only all the choices available to us, but also the data that is relevant to each choice. In the 1950s, behavioral psychologists, who understood that navigating day-to-day life requires people to make hundreds of decisions within a limited time frame, wanted to come up with a new theory for decision-making processes that more accurately captured real life.
Satisficing emerged from the field of behavioral economics, which, unlike traditional economics, took into account factors other than maximizing utility when understanding the way that humans make decisions. Utility maximization suggests people will make decisions that benefit them the most economically. Originally, satisficing and heuristics were discussed only in negative terms: as deficiencies in human decision-making processes that cause us to make suboptimal decisions. This was the view that social scientist Herbert A. Simon held when he first coined the term satisficing in 1956. In his 1956 paper, “Rational Choice and the Structure of the Environment”, he wrote:
“It appears probable that, however adaptive the behavioral of organisms in learning and choice situations, this adaptiveness falls short of the ideal of ‘maximizing’ postulated in economic theory. Evidently, organisms adapt well enough to ‘satisfice’; they do not, in general, ‘optimize’.” 6
He used the term ‘satisfice’ as a combination of the words ‘satisfy’ and ‘suffice’, which captures the process through which individuals make decisions that satisfy their criteria.2 He used a scissor metaphor to describe why traditional economic theory and optimization were insufficient models for looking at decision-making. One blade of the scissor represented humans’ limited brain capacity, while the other blade represented their typical decision-making environment.7 Combined, Simon wrote that the intersection of these blades often leads to satisficing rather than optimizing.
Simon’s understanding of satisficing challenged perfect rationality and homo economicus, two foundational principles of traditional economics. Although Simon understood satisficing as evidence of humans’ cognitive limitations, some people, upon further research, have begun to understand satisficing as a tool, rather than a deficiency.