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Bounded Rationality and Bounded Individuality

In: A Research Annual

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  • John B. Davis

Abstract

This paper argues that since the utility function representation of the individual is derived from standard rationality theory, the view that rationality is bounded implies that individuality should be seen to be bounded as well. The meaning of this idea is developed in terms of two ways in which individuality is bounded, with one bound associated with bounded rationality in Kahneman and Tversky’s prospect theory and another bound associated with bounded rationality in Simon’s thinking. The two bounds on individuality are argued to be employed in agent-based modeling and social identity theory. How bounded individuality might be formally modeled is illustrated in an account of Kirman’s Marseille fish market analysis.

Suggested Citation

  • John B. Davis, 2015. "Bounded Rationality and Bounded Individuality," Research in the History of Economic Thought and Methodology, in: A Research Annual, volume 33, pages 75-93, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rhetzz:s0743-415420150000033011
    DOI: 10.1108/S0743-415420150000033011
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    More about this item

    Keywords

    Bounded rationality; bounded individuality; agent-based modeling; social identity theory; Marseille fish market; B20; B52;
    All these keywords.

    JEL classification:

    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;

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