Limited Rationality and the Limits of Cognitive Capacity

Intending to be rational but having only limited reasonableness due to cognitive limitations.

In 1947, Herbert Simon. proposed in Administrative Behavior

Oliver Williamson laid the foundation for the economics involved in transaction costs.

Limited rationality (bounded rationality, French: rationalité limitée) refers to the fact that an economic agent intends to be rational but has only limited rationality due to the limitations of his/her cognitive abilities. This is the concept of human cognitive ability proposed by Herbert Simon. in "Administrative Behavior" in 1947, and Oliver Williamson used this concept as the basis for his economics on transaction costs.

Based on bounded rationality, Simon (1952) proposed the hypothesis that "economic agents do not maximize an objective function such as utility, but rather set a desired level of achievement with respect to it and do not seek alternatives to further improve the value of the objective function once a value above that level is achieved. This is called the satisficing hypothesis.

#satisfaction

The quote is from Wikipedia.

#cognition #cognitive ability #cognitive limitations

---

This page is auto-translated from /nishio/限定合理性と認知能力の限界. If you looks something interesting but the auto-translated English is not good enough to understand it, feel free to let me know at @nishio_en. I'm very happy to spread my thought to non-Japanese readers.