Bounded rationality

Many models of human behavior in the social sciences assume that humans can be reasonably approximated or described as "rational" entities, especially as conceived by rational choice theory.

Related Topics:
Human behavior - Social sciences - Humans - Rational - Rational choice theory

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Many economics models assume that people are hyperrational, and would never do anything to violate their preferences.

Related Topics:
Economics - Preference

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Herbert Simon, in Models of My Life, points out that most people are only partly rational, and are in fact emotional/irrational in the remaining part of their actions. He gives Albert Einstein as an example of bounded rationality. In other work, he states "boundedly rational agents experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information" (Williamson, p. 553, quoting Simon). Simon, who some claim coined the term, describes a number of dimensions along which "classical" models of rationality can be made somewhat more realistic, while sticking within the vein of fairly rigorous formalization. These include:

Related Topics:
Herbert Simon - Albert Einstein - Information

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• limiting what sorts of utility functions there might be.
• recognizing the costs of gathering and processing information.
• the possibility of having a "vector" or "multi-valued" utility function.

Daniel Kahneman proposes bounded rationality as a model to overcome some of the limitations of the rational-agent models in Economic literature.

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Bounded rationality: References ►