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The Legacy of Herbert Simon in Economic Analysis
Herbert A. Simon has been a leading contributor to cognitive psychology, computer science, public administration, philosophy and statistics, and is the winner of the 1978 Nobel Memorial Prize in Economics. As this authoritative collection demonstrates, his impact on economics has been felt in areas as diverse as the theory of the firm and economic organization, consumer behaviour, law and economics, and environmental economics. Central to his work is the notion of bounded rationality – the mismatch between human decision-making capacities and the scale of the decision problems that people face, which results in satisficing rather than optimising behaviour – and his belief that economic research should start from the study of actual behaviour rather than being based on convenient but unrealistic assumptions. Peter Earl’s choice of articles shows both the kind of economics that emerges when Simon’s philosophy is followed comprehensively, and what happens when neo-classical economists partially adopt his ideas.
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Critical Acclaim
Contributors
Contents
More Information
Herbert A. Simon has been a leading contributor to cognitive psychology, computer science, public administration, philosophy and statistics, and is the winner of the 1978 Nobel Memorial Prize in economics. As this authoritative collection demonstrates, his impact on economics has been felt in areas as diverse as the theory of the firm and economic organization, consumer behaviour, law and economics, and environmental economics. Central to his work is the notion of bounded rationality – the mismatch between human decision-making capacities and the scale of the decision problems that people face, which results in satisficing rather than optimising behaviour – and his belief that economic research should start from the study of actual behaviour rather than being based on convenient but unrealistic assumptions. Peter Earl’s choice of articles shows both the kind of economics that emerges when Simon’s philosophy is followed comprehensively, and what happens when neo-classical economists partially adopt his ideas.
Critical Acclaim
‘Editing two volumes on The Legacy of Herbert Simon in Economic Analysis is no easy task, which makes the reader all the more appreciative of the superb service Peter Earl has rendered here.’
– Esther-Mirjam Sent, Journal of the History of Economic Thought
‘Peter E. Earl has provided an extremely valuable resource for researchers comprising 50 papers which measure the scope and depth of Simon’s key ideas on economic theory. . . both volumes encompass the core achievements of Simon in economics, game theory and artificial intelligence as this bears on behaviour (BR).’
– K. Lawler, Economic Issues
‘Herbert Simon was a towering figure in 20th century science, making lasting contributions to numerous disciplines and fields, and earning the 1978 Nobel Prize in economics. However, his work has never been in the mainstream of economics and has only been imperfectly absorbed by those who have taken an interest. However, a number of recent developments in fields such as the theory of the firm, game theory, law and economics and finance indicates a growing interest in bounded rationality and a greater willingness to let notions of bounded rationality influence the behavioral core of economics. Peter Earl has provided a very useful service to the profession in putting together this collection of classic papers on the legacy of Herbert Simon in economics, including papers by Simon himself as well as papers that have been very difficult to find. The collection is excellent in terms of its coverage and balance. Earl has written extremely useful introductions to each volume. The collection surely belongs not only in academic libraries but also in the private collections of researchers who want speedy access to the classical writings in the area.’
– Nicolai Foss, Copenhagen Business School, Denmark
– Esther-Mirjam Sent, Journal of the History of Economic Thought
‘Peter E. Earl has provided an extremely valuable resource for researchers comprising 50 papers which measure the scope and depth of Simon’s key ideas on economic theory. . . both volumes encompass the core achievements of Simon in economics, game theory and artificial intelligence as this bears on behaviour (BR).’
– K. Lawler, Economic Issues
‘Herbert Simon was a towering figure in 20th century science, making lasting contributions to numerous disciplines and fields, and earning the 1978 Nobel Prize in economics. However, his work has never been in the mainstream of economics and has only been imperfectly absorbed by those who have taken an interest. However, a number of recent developments in fields such as the theory of the firm, game theory, law and economics and finance indicates a growing interest in bounded rationality and a greater willingness to let notions of bounded rationality influence the behavioral core of economics. Peter Earl has provided a very useful service to the profession in putting together this collection of classic papers on the legacy of Herbert Simon in economics, including papers by Simon himself as well as papers that have been very difficult to find. The collection is excellent in terms of its coverage and balance. Earl has written extremely useful introductions to each volume. The collection surely belongs not only in academic libraries but also in the private collections of researchers who want speedy access to the classical writings in the area.’
– Nicolai Foss, Copenhagen Business School, Denmark
Contributors
51 articles, dating from 1951 to 1999
Contributors include: W.J. Baumol, J. Conlisk, G. Eliasson, B.J. Loasby, P. Mirowski, R.R. Nelson, R. Radner, R. Selten, H.A. Simon, O.E. Williamson
Contributors include: W.J. Baumol, J. Conlisk, G. Eliasson, B.J. Loasby, P. Mirowski, R.R. Nelson, R. Radner, R. Selten, H.A. Simon, O.E. Williamson
Contents
Contents:
Volume I:
Acknowledgements
Introduction Peter E. Earl
PART I THE NOBEL LAUREATE
1. The Royal Swedish Academy of Sciences (1979), ‘The Nobel Memorial Prize in Economics 1978: The Official Announcement of the Royal Academy of Sciences’
2. William J. Baumol (1979) ‘On the Contributions of Herbert A. Simon to Economics’
3. Albert Ando (1979), ‘On the Contributions of Herbert A. Simon to Economics’
4. Herbert A. Simon (1979), ‘Rational Decision Making in Business Organizations’
PART II BOUNDED RATIONALITY (1): OVERVIEW
5. Herbert A. Simon (1972), ‘Theories of Bounded Rationality’
6. Roy Radner (1975), ‘Satisficing’
7. Reinhard Selten (1998), ‘Aspiration Adaptation Theory’
8. John Conlisk (1996), ‘Why Bounded Rationality: The Much Too Long Version’
PART III BOUNDED RATIONALITY (2): IN NEOCLASSICAL ECONOMICS
9. Neil M. Kay (1995), ‘Alchian and the "Alchian Thesis"’
10. Barton L. Lipman (1995), ‘Information Processing and Bounded Rationality: A Survey’
11. Robert J. Aumann (1997), ‘Rationality and Bounded Rationality’
12. Esther-Mirjam Sent (1997), ‘Sargent versus Simon: Bounded Rationality Unbound’
PART IV BOUNDED RATIONALITY (3): BEHAVIOURAL APPROACHES
13. Denis A. Lussier and Richard W. Olshavsky (1979), ‘Task Complexity and Contingent Processing in Brand Choice’
14. Gerd Gigerenzer and Daniel G. Goldstein (1996), ‘Reasoning the Fast and Frugal Way: Models of Bounded Rationality’
15. Steven M. Shugan (1980), ‘The Cost of Thinking’
16. Bruce E. Kaufman (1999), ‘Emotional Arousal as a Source of Bounded Rationality’
17. Mark Pingle and Richard H. Day (1996), ‘Modes of Economizing Behavior: Experimental Evidence’
18. Arnold C. Cooper, Timothy B. Folta and Carolyn Woo (1995), ‘Entrepreneurial Information Search’
19. Andrew L. Zacharakis and G. Dale Meyer (1998), ‘A Lack of Insight: Do Venture Capitalists Really Understand their own Decision Process?’
20. Cristiano Antonelli (1989), ‘A Failure-Inducement Model of Research and Development Expenditure’
21. Kenneth W. Koput (1997), ‘A Chaotic Model of Innovative Search: Some Answers, Many Questions’
22. Eric von Hippel and Marcie J. Tyre (1995), ‘How Learning by Doing is Done: Problem Identification in Novel Process Equipment’
23. Pamela S. Barr and Anne S. Huff (1997), ‘Seeing isn’t Believing: Understanding Diversity in the Timing of Strategic Response’
PART V BOUNDED RATIONALITY (4): SYMPATHETIC CRITICS
24. Brian J. Loasby (1989), ‘Herbert Simon’s Human Rationality’
25. Marina Bianchi (1990), ‘The Unsatisfactoriness of Satisficing: From Bounded Rationality to Innovative Rationality’
26. Geoffrey M. Hodgson (1997), ‘The Ubiquity of Habits and Rules’
PART VI DECOMPOSABILITY AND HIERARCHY
27. Herbert A. Simon (1962) ‘The Architecture of Complexity’
28. Roy Radner (1992), ‘Hierarchy: The Economics of Managing’
29. Ron Sanchez and Joseph T. Mahoney (1996), ‘Modularity, Flexibility, and Knowledge Management in Product and Organization Design’
Name Index
Volume II:
Acknowledgements
Introduction Peter E. Earl
PART I COMPETITION AND MARKET PROCESSES
1. Peter Reid Dickson (1992), ‘Toward a General Theory of Competitive Rationality’
2. Richard R. Nelson and Sidney G. Winter (1978), ‘Forces Generating and Limiting Concentration under Schumpeterian Competition’
3. Timothy M. Wakeley (1997), ‘The Output Decision of the Firm - A Behavioural Algorithm’
4. Robert E. Krider and Charles B. Weinberg (1997), ‘Spatial Competition and Bounded Rationality: Retailing at the Edge of Chaos’
5. Philip Mirowski and Koye Somefun (1998), ‘Markets as Evolving Computational Entities’
6. John D. Sterman (1985), ‘A Behavioral Model of the Economic Long Wave’
PART II ECONOMICS OF BUSINESS ORGANIZATION
7. Oliver E. Williamson (1973), ‘Markets and Hierarchies: Some Elementary Considerations’
8. Oliver E. Williamson, Michael L. Wachter and Jeffrey E. Harris (1975), ‘Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange’
9. Peter J. Buckley and Malcolm Chapman (1997), ‘The Perception and Measurement of Transaction Costs’
10. Peter W. Roberts and Royston Greenwood (1997), ‘Integrating Transaction Cost and Institutional Theories: Toward a Constrained-Efficiency Framework for Understanding Organizational Design Adoption’
11. Herbert A. Simon (1951), ‘A Formal Theory of the Employment Relationship’
12. Peter D. Sherer, Nikolai Rogovsky and Norman Wright (1998), ‘What Drives Employment Relationships in Taxicab Organizations? Linking Agency to Firm Capabilities and Strategic Opportunities’
13. Kathleen R. Conner and C.K. Prahalad (1996), ‘A Resource-based Theory of the Firm: Knowledge Versus Opportunism’
14. Robert M. Grant (1996), ‘Toward a Knowledge-Based Theory of the Firm’
15. Gunnar Eliasson (1990), ‘The Firm as a Competent Team’
PART III LAW AND ECONOMICS
16. Jon D. Hanson and Douglas A. Kysar (1999), ‘Taking Behavioralism Seriously: Some Evidence of Market Manipulation’
PART IV ECOLOGICAL ECONOMICS
17. Stephen J. DeCanio (1999), ‘Estimating the Non-Environmental Consequences of Greenhouse Gas Reductions is Harder Than You Think’
18. Sylvie Faucheux and Géraldine Froger (1995), ‘Decision-Making under Environmental Uncertainty’
19. Ronald D. Brunner and Tim W. Clark (1997), ‘A Practice-Based Approach to Ecosystem Management’
PART V THE PUBLIC SECTOR
20. Charles A.M. de Bartolome (1995), ‘Which Tax Rate do People Use: Average or Marginal?’
21. L. Douglas Kiel and Barry J. Seldon (1998), ‘Measuring Temporal Complexity in the External Environment: Nonlinearity and the Bounds of Rational Action’
22. Linda F. Dennard (1995), ‘Neo-Darwinism and Simon’s Bureaucratic Antihero’
Select Bibliography of the Writings of Herbert A. Simon
Name Index
Volume I:
Acknowledgements
Introduction Peter E. Earl
PART I THE NOBEL LAUREATE
1. The Royal Swedish Academy of Sciences (1979), ‘The Nobel Memorial Prize in Economics 1978: The Official Announcement of the Royal Academy of Sciences’
2. William J. Baumol (1979) ‘On the Contributions of Herbert A. Simon to Economics’
3. Albert Ando (1979), ‘On the Contributions of Herbert A. Simon to Economics’
4. Herbert A. Simon (1979), ‘Rational Decision Making in Business Organizations’
PART II BOUNDED RATIONALITY (1): OVERVIEW
5. Herbert A. Simon (1972), ‘Theories of Bounded Rationality’
6. Roy Radner (1975), ‘Satisficing’
7. Reinhard Selten (1998), ‘Aspiration Adaptation Theory’
8. John Conlisk (1996), ‘Why Bounded Rationality: The Much Too Long Version’
PART III BOUNDED RATIONALITY (2): IN NEOCLASSICAL ECONOMICS
9. Neil M. Kay (1995), ‘Alchian and the "Alchian Thesis"’
10. Barton L. Lipman (1995), ‘Information Processing and Bounded Rationality: A Survey’
11. Robert J. Aumann (1997), ‘Rationality and Bounded Rationality’
12. Esther-Mirjam Sent (1997), ‘Sargent versus Simon: Bounded Rationality Unbound’
PART IV BOUNDED RATIONALITY (3): BEHAVIOURAL APPROACHES
13. Denis A. Lussier and Richard W. Olshavsky (1979), ‘Task Complexity and Contingent Processing in Brand Choice’
14. Gerd Gigerenzer and Daniel G. Goldstein (1996), ‘Reasoning the Fast and Frugal Way: Models of Bounded Rationality’
15. Steven M. Shugan (1980), ‘The Cost of Thinking’
16. Bruce E. Kaufman (1999), ‘Emotional Arousal as a Source of Bounded Rationality’
17. Mark Pingle and Richard H. Day (1996), ‘Modes of Economizing Behavior: Experimental Evidence’
18. Arnold C. Cooper, Timothy B. Folta and Carolyn Woo (1995), ‘Entrepreneurial Information Search’
19. Andrew L. Zacharakis and G. Dale Meyer (1998), ‘A Lack of Insight: Do Venture Capitalists Really Understand their own Decision Process?’
20. Cristiano Antonelli (1989), ‘A Failure-Inducement Model of Research and Development Expenditure’
21. Kenneth W. Koput (1997), ‘A Chaotic Model of Innovative Search: Some Answers, Many Questions’
22. Eric von Hippel and Marcie J. Tyre (1995), ‘How Learning by Doing is Done: Problem Identification in Novel Process Equipment’
23. Pamela S. Barr and Anne S. Huff (1997), ‘Seeing isn’t Believing: Understanding Diversity in the Timing of Strategic Response’
PART V BOUNDED RATIONALITY (4): SYMPATHETIC CRITICS
24. Brian J. Loasby (1989), ‘Herbert Simon’s Human Rationality’
25. Marina Bianchi (1990), ‘The Unsatisfactoriness of Satisficing: From Bounded Rationality to Innovative Rationality’
26. Geoffrey M. Hodgson (1997), ‘The Ubiquity of Habits and Rules’
PART VI DECOMPOSABILITY AND HIERARCHY
27. Herbert A. Simon (1962) ‘The Architecture of Complexity’
28. Roy Radner (1992), ‘Hierarchy: The Economics of Managing’
29. Ron Sanchez and Joseph T. Mahoney (1996), ‘Modularity, Flexibility, and Knowledge Management in Product and Organization Design’
Name Index
Volume II:
Acknowledgements
Introduction Peter E. Earl
PART I COMPETITION AND MARKET PROCESSES
1. Peter Reid Dickson (1992), ‘Toward a General Theory of Competitive Rationality’
2. Richard R. Nelson and Sidney G. Winter (1978), ‘Forces Generating and Limiting Concentration under Schumpeterian Competition’
3. Timothy M. Wakeley (1997), ‘The Output Decision of the Firm - A Behavioural Algorithm’
4. Robert E. Krider and Charles B. Weinberg (1997), ‘Spatial Competition and Bounded Rationality: Retailing at the Edge of Chaos’
5. Philip Mirowski and Koye Somefun (1998), ‘Markets as Evolving Computational Entities’
6. John D. Sterman (1985), ‘A Behavioral Model of the Economic Long Wave’
PART II ECONOMICS OF BUSINESS ORGANIZATION
7. Oliver E. Williamson (1973), ‘Markets and Hierarchies: Some Elementary Considerations’
8. Oliver E. Williamson, Michael L. Wachter and Jeffrey E. Harris (1975), ‘Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange’
9. Peter J. Buckley and Malcolm Chapman (1997), ‘The Perception and Measurement of Transaction Costs’
10. Peter W. Roberts and Royston Greenwood (1997), ‘Integrating Transaction Cost and Institutional Theories: Toward a Constrained-Efficiency Framework for Understanding Organizational Design Adoption’
11. Herbert A. Simon (1951), ‘A Formal Theory of the Employment Relationship’
12. Peter D. Sherer, Nikolai Rogovsky and Norman Wright (1998), ‘What Drives Employment Relationships in Taxicab Organizations? Linking Agency to Firm Capabilities and Strategic Opportunities’
13. Kathleen R. Conner and C.K. Prahalad (1996), ‘A Resource-based Theory of the Firm: Knowledge Versus Opportunism’
14. Robert M. Grant (1996), ‘Toward a Knowledge-Based Theory of the Firm’
15. Gunnar Eliasson (1990), ‘The Firm as a Competent Team’
PART III LAW AND ECONOMICS
16. Jon D. Hanson and Douglas A. Kysar (1999), ‘Taking Behavioralism Seriously: Some Evidence of Market Manipulation’
PART IV ECOLOGICAL ECONOMICS
17. Stephen J. DeCanio (1999), ‘Estimating the Non-Environmental Consequences of Greenhouse Gas Reductions is Harder Than You Think’
18. Sylvie Faucheux and Géraldine Froger (1995), ‘Decision-Making under Environmental Uncertainty’
19. Ronald D. Brunner and Tim W. Clark (1997), ‘A Practice-Based Approach to Ecosystem Management’
PART V THE PUBLIC SECTOR
20. Charles A.M. de Bartolome (1995), ‘Which Tax Rate do People Use: Average or Marginal?’
21. L. Douglas Kiel and Barry J. Seldon (1998), ‘Measuring Temporal Complexity in the External Environment: Nonlinearity and the Bounds of Rational Action’
22. Linda F. Dennard (1995), ‘Neo-Darwinism and Simon’s Bureaucratic Antihero’
Select Bibliography of the Writings of Herbert A. Simon
Name Index
