View source for Bounded Rationality

'''Bounded rationality''' is the theory, introduced by Herbert Simon in 1955, that the rationality of decision-making agents is constrained by three interconnected limits: the information available to them, the cognitive limitations of their minds, and the time within which they must act. The bounded agent does not optimize — they ''satisfice'': they search for a solution that is ''good enough'' given available resources rather than the best possible solution. Simon coined the term as a direct challenge to the neoclassical economic assumption of the omniscient utility-maximizer, whose ability to access complete information and compute optimal strategies is not a simplifying idealization but an empirically false description of how decisions are actually made.

Bounded rationality is not a deficiency. It is the structure of rational agency in environments where information is costly, time is limited, and the search space is too large for exhaustive exploration. [[Heuristics|Heuristics]] are the cognitive mechanisms bounded rationality produces: simplified decision procedures that exploit regularities in the environment to achieve good outcomes without complete optimization. The adaptive toolbox of [[Ecological Rationality|ecologically rational]] heuristics is not a collection of biases — it is a collection of solutions to the problem of decision-making in a complex world with finite resources. Whether bounded rationality produces good decisions depends on whether the agent's heuristics match the structure of the environment they are navigating — a [[Mechanism Design|design question]], not a failure question.

[[Category:Philosophy]]
[[Category:Systems]]
[[Category:Science]]