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Bounded Rationality, Satisficing and the Evolution of Economic Thought

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  • Clement A. Tisdell

Abstract

Provides a sketch of the development of the concept of bounded rationality in economic thought. The concept of rationality has several meanings. These different meanings are taken into account in considering the further development of economic thought. Different views of ecological rationality are critically examined in the light of these concepts. Whether or not various theories of behavioral economics can be classified as exhibiting bounded rationality is discussed. Satisficing behavior is commonly associated with bounded rationality but as demonstrated, it is not the only reason for adopting such behavior. The idea of some authors that optimization models under constraints are of little or no relevance to bounded rationality is rejected. Bounded rationality is an important contributor to the diversity of (economic) behaviors. This is stressed. Whether or not a behavior is rational depends to a considerable extent on the situation (the constraints) that decision-makers or actors face. The time-constraint is very important as an influence on the rationality of decisions. Aspects of this are covered.

Suggested Citation

  • Clement A. Tisdell, 2017. "Bounded Rationality, Satisficing and the Evolution of Economic Thought," Economic Theory, Applications and Issues Working Papers 264873, University of Queensland, School of Economics.
  • Handle: RePEc:ags:uqseet:264873
    DOI: 10.22004/ag.econ.264873
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    References listed on IDEAS

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    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 69(1), pages 99-118.
    2. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
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    5. Clem Tisdell, 2010. "The Precautionary Principle Revisited: Its Interpretations And Their Conservation Consequences," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(02), pages 335-352.
    6. Stigler, George J., 2011. "Economics of Information," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
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