CONCEPT
Bounded Rationality
Simon's 1955 thesis that human decision-makers operate under binding constraints of information, computation, and time — producing satisficing rather than optimization, and demolishing the foundation of classical economics.
Bounded rationality is Herbert Simon's foundational contribution to the social sciences: the recognition that real decision-makers — human or institutional — cannot optimize because the informational and computational requirements of optimization exceed the capacity of any biological mind. Instead, they satisfice, searching sequentially through alternatives until one clears a threshold of acceptability, then stopping. The insight earned Simon the 1978 Nobel Prize in Economics and dissolved the fiction of Homo economicus that had powered a century of economic theory. Its architectural implication is that every institution, hierarchy, and organizational form ever built is at bottom a device for managing cognitive limits. The concept has acquired new urgency in the AI age: the bounds Simon identified — information, computation, time — have been dramatically relaxed, while a fourth bound he also named, attention, remains intact and has become the binding constraint.
In The You On AI Field Guide
Simon's 1955 paper 'A Behavioral Model of Rational Choice' introduced bounded rationality as a corrective to the prevailing