guru_ herbert simon _ the economist

4/24/2014 Guru: Herbert Simon | The Economist

http://www.economist.com/node/13350892 1/4

Mar 20th 2009

Guru

Herbert Simon

Herbert Simon (1916-

2001) is most famous for what is known to economists as the

theory of bounded rationality, a theory about economic

decision-making that Simon himself preferred to call

satisficing, a combination of two words: satisfy and suffice.

Contrary to the tenets of classical economics, Simon

maintained that individuals do not seek to maximise their

benefit from a particular course of action (since they cannot

assimilate and digest all the information that would be needed

to do such a thing). Not only can they not get access to all the

information required, but even if they could, their minds would

be unable to process it properly. The human mind necessarily

restricts itself. It is, as Simon put it, bounded by cognitive

limits.

Hence people, in many different situations, seek something

that is good enough, something that is satisfactory. Humans,

for example, when in shopping mode, aspire to something that

they find acceptable, although that may not necessarily be

optimal. They look through things in sequence and when they

come across an item that meets their aspiration level they go

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In an information-rich world, the wealthof information meansa dearth of somethingelse: a scarcity ofwhatever it is thatinformationconsumes. Whatinformationconsumes is ratherobvious: it consumesthe attention of its

for it. This real-world behaviour is what Simon called

satisficing.

He applied the idea to organisations as well as to individuals.

Managers do much the same thing as shoppers in a mall.

Whereas economic man maximises, selects the best

alternative from among all those available to him, he wrote,

his cousin, administrative man, satisfices, looks for a course of

action that is satisfactory or good enough'. He went on to say:

Because he treats the world as rather empty and ignores the

interrelatedness of all things (so stupefying to thought and

action), administrative man can make decisions with relatively

simple rules of thumb that do not make impossible demands

upon his capacity for thought.

The principle of satisficing can

also be applied to events such as

filling in questionnaires.

Respondents often choose

satisfactory answers rather than

searching for an optimum

answer. Satisficing of this kind

can dramatically distort the

traditional statistical methods of

market research.

Simon, born and raised in



recipients. Hence awealth of informationcreates a poverty ofattention and a needto allocate thatattention efficientlyamong theoverabundance ofinformation sourcesthat might consumeit.

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Herbert Simon

Feb 22nd 2001

Milwaukee, studied economics at

the University of Chicago. My

career, he said, was settled at

least as much by drift as by

choice, an undergraduate field

study developing what became

his main field of interest

decision-making within

organisations. In 1949 he moved

to Pittsburgh to help set up a

new graduate school of industrial

administration at the Carnegie Institute of

Technology. He said that his work had two

guiding principles: one was the hardening

of the social sciences; and the other was to

bring about closer co-operation between

natural sciences and social sciences.

Simon was a man of wide interests. He

played the piano wellhis mother was an

accomplished pianistand he was also a

keen mountain climber. At one time he even taught an

undergraduate course on the French Revolution. He was

awarded the Nobel Prize for economics in 1978, to

considerable surprise, since by then he had not taught

economics for two decades.



Notable publications

With March, J.G., Organisations, John Wiley & Sons, 1958;

2nd edn, Blackwell, 1993

Administrative Behaviour: A Study of the Decision Making

Processes in Administrative Organisation, The Macmillan Co,

New York, 1948; 4th edn, Free Press, 1997

More management gurus

This profile is adapted from The Economist Guide to

Management Ideas and Gurus, by Tim Hindle (Profile

Books; 322 pages; 20). The guide has the low-down

on more than 50 of the world's most influential management

thinkers past and present and over 100 of the most influential

business-management ideas. To buy this book, please visit

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guru_ herbert simon _ the economist

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