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Offering alternative models based on such concepts as satisficing (acceptance of viable choices that may not be the undiscoverable optimum) and bounded rationality (the limited extent to which rational calculation can direct human behavior), Simon shows concretely why more empirical research based on experiments and direct observation, rather than just statistical analysis of economic aggregates, is needed.Throughout Herbert Simon's wide-ranging career--in public administration, business administration, economics, cognitive psychology, philosophy, artificial intelligence, and computer science--his central aim has been to explain the nature of the thought processes that people use in making decisions.The third volume of Simon's collected papers continues this theme, bringing together work on this and other economics-related topics that have occupied his attention in the 1980s and 1990s: how to represent causal ordering formally in dynamic systems, the implications for society of new electronic information systems, employee and managerial motivation in the business firm (specifically the implications for economics of the propensity of human beings to identify with the goals of organizations), and the state of economics itself.Offering alternative models based on such concepts as satisficing (acceptance of viable choices that may not be the undiscoverable optimum) and bounded rationality (the limited extent to which rational calculation can direct human behavior), Simon shows concretely why more empirical research based on experiments and direct observation, rather than just statistical analysis of economic aggregates, is needed.The twenty-seven articles, in five sections, each with an introduction by the author, examine the modeling of economic systems, technological change: information technology, motivation and the theory of the firm, and behavioral economics and bounded rationality.

Bounded rationality provides a fundamental economic explanation for non-rational modes of behavior. These non-rational modes underlie both the erratic perturbations of entrepreneurship and the systematic waves of diffusion they initiate which in turn guarantee that the economy operates out of equilibrium. Continuing adjustments out of equilibrium are made possible by financial intermediation. They imply asymmetric changes in individual welfare. The markets for entrepreneurship, ownership and control that liberate creativity and boundedly rational decision-making, therefore, also lead inevitably to conflict among various social groups. Democratic mechanisms for correlating public and private interest that enlist the voluntary participation of agents who are sometimes made worse off in the continuing process of social transformation and which restore access to markets for those who lose is therefore an essential part of a modern economic system. The dialectical interaction among market al1ocations, non-market buffering and stabilizing institutions and democratic process is thus fundamental. Reforms that are based on this interaction achieve voluntary self-transformations. Those that do not, ultimately fall victim to involuntary forces.

Abstract: Many interactions between adjacent elements of public administration are "resolved" by a weak form of bi‐lateral and non‐hierarchical coordination. There are quite intractable obstacles to achieving a good fit between bi‐lateral resolution and higher order aims of government. Formal limits to the results that can be achieved by coordination may be derived from the requirements for optimality in the "Decomposition Model" of decentralised administration. Limits to human capabilities are widely recognised in contemporary computer software that is designed to be "user friendly", yet in the design of systems of statute and administration the limits of human rationality are commonly ignored. Proper statutory definition of functional boundaries can harness innate strengths in the "bounded rationality" of which mere mortals and their institutions are capable, and partially guard against the unwanted effects of its weaknesses. Three main classes of interactions may be defined, and can be dealt with respectively by (a) an external and superior source of statutory power, (b) the use of temporary concurrence powers, and (c) statutory plans. The trick is to be clear about which applies in the circumstances.

This article reflects the feedback of empirical research on theorizing about international relations. The empirical results obtained by both Faber (1987a) and Houweling & Siccama (1988) can be explained by the theory of risky prospects developed by Tversky & Kahneman (1981). As this theory is easily integrated into Simon's concept of bounded rationality in human decision-taking, a theoretical framework for the explanation of international relations based on the resulting theoretical notions concerning human decision-taking is developed. Accordingly, decision-taking by governments concerning international relations is conceived to be steered by their bounded rationality with respect to their behavioural options and interaction opportunities and the goal of minimizing losses in their relative power positions with respect to foreign as well as domestic contenders. Because military power capabilities are not equally distributed across the member-states of the international system, the relative power positions of nations result in group-formation among them due to either actual domination or fear of domination. The dynamics of group-interactions is argued to give rise to global stability in international relations. When the power position of a nation deteriorates and the dynamics of group-interactions is absent the probability of an outbreak of war rises sharply.

"Decision-taking" by state actors in international relations is examined in an analysis of secondary data & applications of the theory of risky prospects, developed by Amos Tversky & Daniel Kahneman ("The Framing of Decisions and Psychology of Choice," Science, 1981, 211, 453-458). This theory is integrated into Herbert A. Simon's concept of bounded rationality in human decision-taking (Reason in Human Affairs, Oxford: Basil Blackwell, 1983). A theoretical framework for the explanation of international relations based on the resulting theoretical notions concerning human decision-taking is developed & explained. 32 References. Adapted from the source document.

Book Reviewed in this articleRATIONAL EXPECTATIONS: MACROECONOMICS FOR THE 1980s? Michael Carter and Rodney MaddockMODEL OF BOUNDED RATIONALITY Herbatt SimonTHINKING ABOUT SOCIAL THINKING: THE PHILOSPHY OF THE SOCIAL SCIENCES Antony FlewGREAT ECONOMISTS SINCE KEYNES Mark Blang