Bounded Rationality and the Beginnings of Behavioral Science
Herbert Simon was an astounding thinker. His ideas spanned multiple disciplines, including behavioral science, economics, psychology and computer science. Driven by his insatiable curiosity and belief that knowledge that was taken for granted had to be more closely analyzed, Simon’s ideas revolutionized the way we think about decision-making.
Not afraid to question mainstream ideologies, Simon dispelled several pillars of traditional economics, which opened the door to behavioral economics. He changed people’s understanding of the term ‘rationality’ and tried to bring mathematical rigor to the social sciences. He believed that it was possible, through experimentation, to gain insight into the workings of the human mind.
On their shoulders
For millennia, great thinkers and scholars have been working to understand the quirks of the human mind. Today, we’re privileged to put their insights to work, helping organizations to reduce bias and create better outcomes.
Bounded Rationality & Satisficing
“Human beings, viewed as behaving systems, are quite simple. The apparent complexity of our behavior over time is largely a reflection of the complexity of the environment in which we find ourselves.
– Herbert Simon in The Sciences of the Artificial 
Herbert Simon began to see flaws in the highly simplified approach to economic modelling when he was writing his dissertation. Simon was adamant that traditional economic theory and methodology needed to change because the models used by traditional economics did not mirror the way people actually behaved. His book Administrative Behavior sought to replace the commonplace model of economics based on maximizing utility with another decision-making model that would take into consideration factors outside utility like emotions, cognitive biases and the environment.2
In 1955, Herbert Simon concretized his thoughts in the essay, “A Behavioral Model of Rational Choice”.3 Simon suggested that economic models based on the idea that the economic man was rational made some incorrect presumptions about humans: that we have all the knowledge required to make the best decisions, that we have stable preferences and will always make the decision which maximizes utility, and that we have the brain capacity to sift through all the information and options and make the best choice.3 Simon instead suggested that people behave according to bounded rationality.
“It is true that humanity is faced with many problems. It always has been but perhaps not always with such keen awareness of them as we have today. We might be more optimistic if we recognized that we do not have to solve all of these problems. Our essential task – a big enough one to be sure – is simply to keep open the options for the future or perhaps even to broaden them a bit by creating new variety and new niches. Our grandchildren cannot ask more of us than that we offer to them the same chance for adventure, for the pursuit of new and interesting designs.”
– Herbert Simon in The Sciences of the Artificial 
Instead of equating rationality to optimization, Simon proposed that economic models needed to take into account the “access of information, and the computational capacities that are actually possessed by organisms, including man, and the kinds of environments in which such organisms exist” (99) relevant to the environment in which a person is making a decision.3 In layman’s terms, Simon believed that people made decisions with as much rationality as could be expected considering the amount of information about the choices they had available to them, their brain capacity, and environmental limitations such as time. He did not throw rationality out the window, rather, the notion was altered to more accurately reflect real-life behavior.
Embedded in bounded rationality was the displacement of homo economicus to humans as satisficers. The traditional economic principle of homo economicus is based on the idea that humans behave in accordance with simple rules that indicate they make decisions to maximize utility. Instead, Simon suggested people don’t always make the ‘best’ decision, but that they make decisions that are ‘good enough’. This is known as satisficing and it is a decision-making strategy that aims for an adequate result, given our cognitive limitations. Simon came up with the term satisficing in an earlier paper, “Rational Choice and the Structure of the Environment”, where 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’.” 4
Pioneer of Artificial Intelligence
Simon is often referred to as the founding father of artificial intelligence (AI). Based on his desire to bring mathematical insights into the social sciences, Simon wanted to dispel the notion of the human mind and its decision-making processes as mysterious. He viewed AI as a way to model the processes that already occur in our minds, as just like us, computers scan data for patterns, they store these patterns to memory and then they apply the patterns to make inferences.
Born out of Simon’s quest to shed light on how humans problem-solve, he also realized that computers could possibly be said to be ‘intelligent’ since they use heuristics and means-end analysis to solve problems, just like us.5
“Teaching is not entertainment, but it is unlikely to be successful unless it is entertaining (the more respectable word is interesting).”
- Herbert Simon in Models of My Life 
Simon tested out his theory that computers displayed intelligence through a number of experiments. With other colleagues, Simon first identified what kind of tasks required intelligence and came up with a list including playing chess, solving math or physics problems, and diagnosing diseases.5 Simon then built computer programs which carried out these tasks. The results showed that alike humans, computer programs made decisions using trial-and-error methods. The outcomes of these trials were stored in the computer’s memory and used to help make future decisions.5
Through his experiments, Simon began to understand both human and artificial intelligence as being dependent on an ability to process information and store it, which leads to pattern recognition.5 Intuition had largely not been understood up until this point, but this realization caused Simon to hypothesize that intuition was really people using information from scenarios and situations they had previously encountered to respond to new situations. Since they remembered what had succeeded and what hadn’t, intuition could lead to making good decisions, even if the decision-making processes happened at a more unconscious level that people couldn’t explain. 6
The Importance of Curiosity
“To make interesting scientific discoveries, you should acquire as many good friends as possible who are energetic, intelligent and knowledgeable as they can be. You will find all the programs you need are stored in your friends, and will execute productively and creatively as long as you don’t interfere too much.”
- Herbert Simon in Models of My Life 
Curiosity has been a topic of debate for psychologists and philosophers for years. Intellectual curiosity has long been understood as the essence of science, as the catalyst that drives research and experimentation. Simon was a huge advocate that curiosity, more so than a belief that science is important, is what drives people, especially children, to learn how to cope, understand and enjoy the physical, biological and social world in which we live. In the chapter “Seek and Ye Shall Find” that he wrote for Designing for Science, Simon claimed that “curiosity calls attention to interesting, odd, and sometimes important items in the drama that is revealed to us through our senses.” (5). 7 He believed that a greater focus on curiosity could help shape scientific educational programs and curricula to get more people interested in the discipline.
It was curiosity which Simon attributed to his own pursuit to dispel existing theories, causing him to attribute intellectual progress to curiosity. He said that “curiosity is the implacable enemy of extant beliefs”. 8 He was extremely curious about almost all aspects of life, providing evidence that curiosity is one of the ingredients necessary to make a great thinker and researcher. He even titled one of his talks at Carnegie Mellon “The cat that curiosity couldn’t kill” that suggested that instead of being an obstacle to his life, curiosity was the drive for his mastery of a range of domains.9
Simon understood curiosity as the habit of examining the environment for interesting patterns and believed that it could be learned.7 There have been many models that try and figure out exactly how much curiosity is the ‘right’ amount of curiosity, and for Simon, it was all about a balance between curiosity and epistemic modesty. Epistemic modesty is the belief that we must always continue to learn, adapt and grow, as people and as thinkers.10
“In the ‘politics’ of science [...] I have had two guiding principles - to work for the ‘hardening’ of the social science so that they will be better equipped with the tools they need for their difficult research tasks; and to work for close relations between natural scientists and social scientists so that they can jointly contribute their special knowledge and skills to those many complex questions of public policy that call for both kinds of wisdom.”
- Herbert Simon in his autobiography for The Nobel Prize 
Herbert A. Simon was born on June 15, 1916, in Milwaukee. He was born into an already accomplished family; his father was an electric engineer and inventor and his mother was an impressive pianist.11 This led to stimulating dinner-table conversations that sparked Simon’s curiosity in a range of subjects, which reflect the scope of his later work. He had some of his books from his childhood until his death, ranging from a handbook on insects to a book on inland waters, to a 7th-grade history book.11
After high school, Simon enrolled at the University of Chicago. On the train on his way to his freshmen year, he met Harold Guetzkow,11 who went on to be a professor of political science, psychology and sociology, and whom Simon attributes an important role to his initial work researching decision-making.12 He was dedicated to focusing on the social sciences with a hope that they could employ the rigor of mathematics which made the ‘hard’ sciences successful.13 Simon did not take a typical path at university, He actually only took one class - boxing. He preferred to study alone and only go to the lectures which interested him before taking the exams. Luckily, he passed them, but don’t let Simon’s story fool you into being a victim of the survivorship bias. He stayed on at the University of Chicago to complete his graduate studies, which is when he met his wife, Dorothea Pye.11 His dissertation, which explored administrative decision-making, was later published as a book, Administrative Behavior. He received his Ph.D. in political science in 1943 and joined the faculty at the University of Chicago.14
He left Chicago to become a professor of administration and psychology at Carnegie Mellon in 1949.15 He helped found a Graduate School of Industrial Administration (now known as the Tepper School of Business).16 At the time, industrial administration was the field dedicated to optimizing complex processes and systems. Simon was one of Carnegie Mellon’s greatest assets and he became the Richard King Mellon University Professor of Computer Science and Psychology.14 He was part of the faculty for over 50 years until he passed away.17
Simon obtained an impressive number of awards during his lifetime. His most notable was the Nobel Prize in Economics, which he received in 1978. Simon hadn’t actually taught an economics course in decades, but the organization recognized him for his pioneering research into the decision-making processes in economic organizations.13 His scientific output was reaching fields beyond the scope of his teaching as his revolutionary take on economics and bounded rationality got the attention of leaders in a number of fields. This is reflected through the diverse fields in which he received notable awards, such as 1986 National Medal of Science, the 1969 Distinguished Scientific Contribution Award of the American Psychological Association, and the 1975 Turing Award of the Association for Computing Machinery.18 The Turing Award is often referred to as the Nobel Prize for Computing, and Simon received it alongside his colleague Allan Newell for their contributions to artificial intelligence and the psychology of human cognition.14
Although it is clear that Simon has a brilliant mind, outside of his work, he lived a relatively simple life. He lived in the same house with Dorothea for 46 years, not feeling the need to move into a bigger or more luxurious house. He had one car and owned one beret which he would wear until it wore out before purchasing another one.11 He didn’t watch television, listen to the radio, or read the newspapers’ headlines. His reason for avoiding the newspapers was because “most of the things that are in the papers today that weren’t yesterday I can predict, at least in general terms”.15 He was a workaholic, but both of his children, Kathie and Peter, say that he still made time for his family and replicated the stimulating dinner conversations that he’d enjoyed with his parents while they were growing up.11
Unfortunately, Simon passed away in February 2001 of complications he endured as a result of an operation for a cancerous tumour.19 Despite his passing, his ideas live on in the ways we think about rationality, decision-making, economic models and artificial intelligence.
Where can we learn more?
Herbert Simon has an impressive list of published books and papers, which can be found here. His dissertation-turned-book Administrative Behavior where Simon began to articulate his belief that economic models needed to adapt to real-life behavior. You can also check out his full paper on bounded rationality, one of his most influential essays, here.
If you are interested in Simon's research in artificial intelligence, you may want to check out his book The Sciences of the Artificial. Published in 1968, the book outlines the means-end analysis that Simon believed drove human-decision making and develops his theory of human problem solving as information processing.
If you want to hear more about Simon’s life, he actually published an autobiography in 1996 called Models of My Life. Simon takes a witty look at his life and tries to explain aspects of his life outside his career through what he has learned as a scientist.
You can also find a few seminars that Simon recorded for a UBS series titled “Nobel Perspectives” on YouTube. One examines why decision-making can be so difficult and another gets Simon’s take on what intuition is.
Although Simon himself never recorded a podcast, you might be interested in Carnegie Mellon’s podcast series “Organizational Learning”, since a number of episodes examine Simon’s contribution to understanding how we learn from experience, ecologies of learning, and organizational intelligence.
- BrainyQuote. (n.d.). Herbert A. Simon Quotes. Retrieved February 2, 2021, from https://www.brainyquote.com/quotes/herbert_a_simon_193209
- Encyclopedia Britannica. (1998, July 20). Behaviourism. https://www.britannica.com/science/behaviourism-psychology
- Simon, H. A. (1956). Rational choice and the structure of the environment. Psychological Review, 63(2), 129-138. https://doi.org/10.1037/h0042769
- Simon, H. A. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 69(1), 99. https://doi.org/10.2307/1884852
- Frantz, R. (2003). Herbert Simon. Artificial intelligence as a framework for understanding intuition. Journal of Economic Psychology, 24(2), 265-277. https://doi.org/10.1016/s0167-4870(02)00207-6
- Farnam Street. (2011, September 9). Herbert Simon: On Experts and Intuition. https://fs.blog/2011/09/on-expertness-and-intuition/
- Simon, H. A. (2001). "Seek and Ye Shall Find” How Curiosity Engenders Discovery. In K. Crowley, C. D. Schunn, & T. Okada (Eds.), Designing for Science: Implications From Everyday, Classroom, and Professional Settings (pp. 5-18). Psychology Press. https://doi-org.ezproxy.library.ubc.ca/10.4324/9781410600318
- Larkey, P. D. (2002). Ask a Simple Question: A Retrospective on Herbert Alexander Simon. Policy Sciences, 35(3), 239-268. https://www.jstor.org/stable/4532563
- Frantz, R., & Marsh, L. (2016). Minds, models and milieux: Commemorating the Centennial of the birth of Herbert Simon. Springer.
- Cobb, J. (2019, February 15). Are you epistemologically modest? Mission to Learn - Lifelong Learning Blog. https://www.missiontolearn.com/epistemological-modesty
- Frank, K. S. (n.d.). Herbert A. Simon: A Family Memory. Carnegie Mellon School of Computer Science. https://www.cs.cmu.edu/simon/kfrank.html
- Druckman, J. N. (2010). Harold Guetzkow’s legacy. Simulation & Gaming, 42(3), 335-337. https://doi.org/10.1177/1046878110378468
- NobelPrize.org. (n.d.). Herbert A. Simon- Biographical. Nobel Media. Retrieved February 2, 2021, from https://www.nobelprize.org/prizes/economic-sciences/1978/simon/biographical/
- Encyclopedia Britannica. (1998, July 20). Herbert A. Simon. https://www.britannica.com/biography/Herbert-A-Simon
- UBS. (n.d.). Herbert A. Simon: Nobel 1978 - Do we understand human behavior? UBS Nobel Perspectives. Retrieved February 2, 2021, from https://www.ubs.com/microsites/nobel-perspectives/en/laureates/herbert-simon.html
- The Library of Economics and Liberty. (n.d.). Herbert Alexander Simon. Retrieved February 2, 2021, from https://www.econlib.org/library/Enc/bios/Simon.html
- Encyclopedia.com. (2021, January 12). Simon, Herbert Alexander. Retrieved February 2, 2021, from https://www.encyclopedia.com/people/social-sciences-and-law/economics-biographies/herbert-alexander-simon
- Carnegie Mellon. (n.d.). Herbert A. Simon. Carnegie Mellon School of Computer Science. Retrieved February 2, 2021, from https://www.cs.cmu.edu/~earthware/Simon.html
- Weil, M. (2001, February 11). Herbert Simon, Nobel Winner For Economic-Drive Idea, Dies. The Washington Post. https://www.washingtonpost.com/archive/local/2001/02/11/herbert-simon-nobel-winner-for-economic-drive-idea-dies/638badcc-fc9e-4a52-937e-eb58141cb145/
- Goodreads. (n.d.). Herbert A. Simon Quotes. Retrieved February 2, 2021, from https://www.goodreads.com/author/quotes/89879.Herbert_A_Simon?page=2