Herbert Simon
Citation: For his pioneering research into the decision-making process within economic organizations.
The key idea
Bounded rationality. Real decision-makers don't optimise; they satisfice — pick the first option that meets a threshold. Organisations are routines and procedures for managing limited cognitive capacity.
The explanation
Simon argued that the homo economicus of textbooks — perfectly rational, perfectly informed — bore no resemblance to real decision-makers. Instead, people use heuristics, satisfice within aspirations, and rely on organisational routines. This insight launched behavioural economics (Kahneman 2002, Thaler 2017) and modern organisation theory.
Why Africa should care
Bounded rationality explains a lot about African retail finance: M-Pesa users don't compare 25 mobile-money products by NPV; they pick the first one that works. Microfinance clients who appear to choose 'irrationally' high-cost short-term loans are often satisficing under cognitive constraints — choice-architecture design (Module 7 of the Behavioural Econ course) can dramatically improve outcomes without changing the underlying products.
How to use it
Design products, forms, and policies for boundedly-rational humans, not for the homo economicus. Default settings, simplified choices, single-screen interfaces, and a 'first option that works' framing routinely outperform optimising-style choice menus.
Canonical works
- Herbert A. Simon (1947) "Administrative Behavior" Free Press
- Herbert A. Simon (1955) "A Behavioral Model of Rational Choice" Quarterly Journal of Economics
- Herbert A. Simon (1982-1997) "Models of Bounded Rationality (3 vols)" MIT Press
More from Foundations · 1969-1979
- 1969Ragnar Frisch and Jan Tinbergen
Economics is a measurable science. Build dynamic equations of the economy, estimate them with data, use them to forecast and design policy.
- 1970Paul Samuelson
Economic theory has the structure of physics: optimisation under constraints, with comparative statics and dynamic stability following from the same maximisation principles.
- 1971Simon Kuznets
Growth is structural transformation, not a single line on a chart. Inequality follows an inverted U as economies industrialise — the Kuznets curve.
- 1972Kenneth Arrow and John Hicks
When can the totality of competitive markets simultaneously clear, and when is that outcome socially efficient? Arrow-Debreu (1954) proved existence; the First Welfare Theorem proved efficiency — under restrictive assumptions.
- 1973Wassily Leontief
An economy is a matrix. Each sector produces output by buying inputs from other sectors. Once you know the matrix of inter-industry flows, you can compute the total impact of any final-demand change.