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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.

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  • 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, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    2. Stigler, George J., 2011. "Economics of Information," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
    3. Clement Allan Tisdell & Serge Svizzero, 2017. "Optimization Theories of the Transition from Foraging to Agriculture: A Critical Assessment and Proposed Alternatives," Post-Print hal-02145490, HAL.
    4. Clem Tisdell, 1996. "Bounded Rationality and Economic Evolution," Books, Edward Elgar Publishing, number 960.
    5. Gerd Gigerenzer & Reinhard Selten (ed.), 2002. "Bounded Rationality: The Adaptive Toolbox," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571641, April.
    6. Vernon L. Smith, 2003. "Constructivist and Ecological Rationality in Economics," American Economic Review, American Economic Association, vol. 93(3), pages 465-508, June.
    7. Clement A. Tisdell, 2013. "Competition, Diversity and Economic Performance," Books, Edward Elgar Publishing, number 13026.
    8. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    9. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
    10. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1039-1061.
    11. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    12. Lasselle, Laurence & Svizzero, Serge & Tisdell, Clem, 2005. "Stability And Cycles In A Cobweb Model With Heterogeneous Expectations," Macroeconomic Dynamics, Cambridge University Press, vol. 9(5), pages 630-650, November.
    13. Clem Tisdell, 1971. "Economic policy, forecasting and flexibility," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 106(1), pages 34-54, March.
    14. 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.
    15. R. L. Hall & C. J. Hitch, 1939. "Price Theory And Business Behaviour," Oxford Economic Papers, Oxford University Press, vol. 0(1), pages 12-45.
    16. Clem Tisdell, 1974. "Comments on Muth’s note on economic policy, forecasting and flexibility," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 110(1), pages 176-177, March.
    17. Tisdell, Clem, 1970. "Implications of Learning for Economic Planning," Economic Change and Restructuring, Springer, vol. 10(3), pages 177-192.
    18. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    19. Clement A. Tisdell, 2015. "Sustaining Biodiversity and Ecosystem Functions," Books, Edward Elgar Publishing, number 15296.
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    1. Svizzero, Serge & Tisdell, Clement, 2019. "Barter and the Origin of Money and Some Insights from the Ancient Palatial Economies of Mesopotamia and Egypt," Economic Theory, Applications and Issues Working Papers 291788, University of Queensland, School of Economics.
    2. Clement Tisdell & Serge Svizzero, 2019. "Economic Theory, Phoenician Pre-coinage External Trade, Changes in the Economic Surplus and its Appropriation - An initial Perspective," Working Papers hal-02274893, HAL.

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