Perspectives on Bounded Rationality

Economists have for long expressed dissatisfaction with the complex models of strict rationality that are so pervasive in economic theory. There are several objections to such models. First, casual empiricism or even just simple introspection lead to the conclusion that even in quite simple decision problems, most economic agents are not in fact maximizers, in the sense that they do not scan the choice set and consciously pick a maximal element from it. Second, such maximizations are often quite difficult, and even if they wanted to, most people (including economists and even computer scientists) would be unable to carry them out in practice. Third, polls and laboratory experiments indicate that people often fail to conform to some of the basic assumptions of rational decision theory. Fourth, laboratory experiments indicate that the conclusions of rational analysis (as distinguished from the assumptions) sometimes fail to conform to "reality." And finally, the conclusions of rational analysis sometimes seem unreasonable even on the basis of simple introspection.