Bounded Rationality and the Limits of Human Nature

This article was published in the PA Times Online January, 2020 and can be viewed here.

“The central concern of administrative theory is with the boundary between the rational and the non rational aspects of human social behavior” – Herbert Simon in Administrative Behavior (1947)


In his existential masterpiece The Myth of Sisyphus, Albert Camus discusses life and man’s never-ending journey to find meaning within it. Camus explains that “in this unintelligible and limited universe, man’s fate henceforth assumes its meaning” (Camus, 21). That is, because we are born into a world without meaning in and of itself, people must assign meaning to the world around us. People must interact with the world around them to assign and value things, objects, relationships, and so on to find meaning. But, as Camus continues – and this is the important part – the human mind, “when it reaches its limits, must make a judgement and choose its conclusions” (Camus, 27). This is an astounding and fascinating concept is one that those any a variety of fields from social sciences to political sciences are familiar with: Bounded rationality. This concept of bounded rationality is one that needs to be understood if one wants to understand decision making on an individual and organizational level but it is also severely important concept when trying to understand human nature as a whole as well as oneself. So what is bounded rationality?

In Herbert Simon’s ground breaking work Administrative Behavior, he brought Public Administration out of the Classical era of thought and into the Behavioral school of thought – primarily with a better understanding of human nature and how it is best suited to meet the needs of an organization and vice versa. Simon brought forward many important aspects of Classical thought such as a focus on scientific inquiry, the importance of efficiency, a value-free environment, and others while adding many more but perhaps the most important, based on its universal and wide-reaching significance, is the concept of bounded rationality. Simon, like many before him, sought to develop a science of public administration, one that is based on “systematic, empirical analysis rather than on casual observation and proverbs; it should be inductive, not deductive, in nature, its “principles” the result of an accumulation of empirical evidence rather than intuition” (Fry and Raadschwlders, 289). Simon, his work being published only relatively recently, is not the first to inquire about the limits of human rationality. Montesquieu, for example, in L’esprit de Lois, discussed the differences in governments based on constraints in human nature. Even fellow public administrator, Luther Gulick noted that we are “confronted at the start by the inexorable limits of human nature” an observation not without significance. Evolutionary Biologist Richard Dawkins, too, found this point to be key to understanding human nature and indeed humans themselves for, as he mentioned, “you can make some inferences about a man’s character if you know something about the conditions in which he has survived and prospered” (Dawkins, 2).  Through these inferences, Herbert Simon brings forth bounded rationality.

People are not entirely rational – a priori if there ever was. And Simon notes that “human beings, like most complex organisms, can only deal consciously with one or a very few things at once” and because we are creatures of passions, habits, and many unconscious activities, people can never act fully rational (Simon, 90). There are six types of rationality as defined by Simon, but for the purpose of making the best decisions, objective rationality is most useful because it is “the correct behavior for maximizing value attainment relative to the actual knowledge of the decision maker” (Fry and Schelders, 294). Objective rationality is defined by three criteria – first, it requires a complete knowledge and anticipation of all consequences that follow each decision which can, alone, begin to create complete mess of rational decision making when one considers other actor’s limitations and conflicts. Second, because the consequences are always in the future, the decision maker must be able to utilize accurate and relevant imagination to fill the hole that experience lacks – but, again and quite quickly, one can see that values and biases can easily distort expected consequences. And finally, third, objective rationality requires a singular choice out of the many possibilities. It must be kept in mind that in actuality, one can never full grasp a full objective rationality in any given situation (Simon 93-94).

Simon sees rationality on a continuum ranging from the subconscious, involuntary actions with incomplete or skewed information on one end and conscious, deliberate and complete information on the other. Individuals, groups, and organizations can fall anywhere between the two extremes, but Simon identifies two general descriptions of human behavior. First, the Economic Man, who is an elite decision maker and a true champion of the mind and of passions. An Economic Man is one who knows all relevant aspects of the current situation, can accurately imagine all alternative courses of action and the relevant risks and consequences, understands his own, and indeed all other actor’s biases and values and knows how to assert them in the decision making process – not to mention, all necessary skills needed to utilize this knowledge and make  the best decision (Fry and Raadschelders, 291 – 292). On the opposite end of the continuum, is the Economic Man’s adverse: The Satisficing Man. This decision maker can only understand or consider a few aspects at a time, has an extremely narrow view of what is relevant to the situation, cannot foresee many or any alternatives, and fails to completely understand their own or other’s biases and values that could distort the decision making process. This model may also lack the needed skills and competencies to fully carry out the needed actions to complete the decision making process. The Satisficing Man model reaches “the bottleneck” of human limitations and cannot accurately or competently make fully rational decisions – he, therefore, satisfices the best possible decision based on these limitations. Now, it is important to note that no one can ever really act or consistently act, on their own or ever, within the Economic Man model – and this is the great lesson. To refer back to Camus, human nature, “when it reaches its limits, must make a judgement and choose its conclusions” becoming, in turn, a version of the Satisfising Man model (Camus, 27). People cannot hope to ever fully understand all the facts and variables of a situation and cannot hope to become masters of their passions sufficiently enough to operate within the scope of the Economic Man. We, therefore, must understand the limits facing ourselves and others to better learn about others, groups, organizations, and indeed, ourselves. Simon says it himself when he explains that

Because administrators satisfice rather than maximize, they can choose without first examining all the possible behavior alternatives and without ascertaining that these are in fact all the alternatives. Because they treat the world as rather empty and ignore the interrelatedness of all things (so stupefying to thought and action), they can make their decisions with relatively simple rules of thumb that do not make impossible demands on their capacity for thought. Simplification may lead to error, but there is no realistic alternative in the fact of the limits on human knowledge and reasoning

– Herbert Simon in Administrative Behavior, pg 119

The limitations of human nature are easily imaged. If it is not easily identified in oneself, then rely on those around you. People are inherently flawed based on design, a concept that is also easily imaginable when one observes that “evolution has meant that our prefrontal lobes are too small, our adrenal glands are too big, and our reproductive organs apparently designed by committee; a recipe which, alone or in combination, is very certain to lead to some unhappiness and disorder” (Hitchens, 8). This unhappiness and disorder is born from the mistakes people and administrators make from satisficing. But what does Simon, specifically, list as some of our innate limitations? One important, and most obvious, is the incompleteness of knowledge –  people usually do not, and most likely can not, know everything relevant that pertains to a specific situation – not to mention most do not have the time or resources to devote to discovering the necessary information. Also, people have a difficult time collecting and utilizing information to accurately anticipate the problems and difficulties that will soon approach them because “the mind cannot at a single moment grasp the consequences in their entirety. Instead, attention shifts from one value to another with consequent shifts in preference” (Simon, 95-96). Additionally, there can be the case where someone can think completely rationally and still make irrational decisions. A decision maker, “may think that a choice is the only rational one, eg to stop smoking, but nevertheless not take it. Conclusions reached by rational deliberations may be overridden by strong emotional impulses” and even strong values (Selten, 1999). American geologist Kurt Wise, for example, was confronted by evidence that the world was older than ten thousand years old and, being a devout Christian, found this to be a disturbing contradiction with his faith. Panicked, Dr. Wise could not stand it any more and took a bible and scissors and “literally cutting out every verse that would have to go if the scientific world-view were true. At the end of this ruthlessly honest and labour-intensive exercise, there was so little left of his bible…” that he decided to accept the word of god and toss out any evidence contrary to it – so, “with great sorrow, [he] tossed into the fire all his dreams and hopes in science” (Dawkins, 172). Values and biases have the ability to distort memory and indulge in cognitive bias which can corrupt how we process new information. Imagine, as an administrator should, how this juggling of values combined with misunderstandings, incomplete knowledge, and limited ability to conceptualize and utilize knowledge has the ability to greatly complicate human actions and decisions in a group setting.  

The most influential of Simon’s observations is probably the human nature of passion and emotion on the decision making process. Simon wished to create a value-free foundation of public administration and sought to identify and understand where values obscure rationality. This concept, known as fact-value dichotomy, is quite eerily similar to Scotish philosopher David Hume’s is-ought dichotomy in that it seeks to rid the decision making of administrators of decisions based on arbitrary and very much irrational and value-laden qualities. Simon shares even more with Mr. Hume, especially regarding how emotions and passions create a huge limitation for people’s reasoning. Hume noted that “reason is, and ought only to be the slave of the passions, and can never pretend to any other office than to serve and obey them” – likewise, Simon agreed that “emotion is strong the focus of attention may be narrowed to a very specific, and perhaps transient, goal, and we may ignore important matters that we would otherwise take into account before acting” (Simon, 91). It is important to note, like the two men above do, that there does not need to be a separation of passions and decision making, necessarily – but it must be something that people, and responsible administrators become aware of. Emotion and reason, naturally, go hand-in-hand and create strong motivation to reach goals and judging quality in the outcomes. There is an important lesson here: passions and emotions, though can be a limitation that bounds rationality, ought not be controlled and dictated – instead they should be observed, understood, and tended to. The key to this essay revealed – No, one can never hope to break the bounds of our rationality because these bounds are intrinsically natural to human behavior. Instead, they need to be sought after and understood as much as possible.

One last important aspect of values to note that they can twist and distort our passions in ways that can change the direction of an individual, group, or organization’s rational decision making. An unintended flaw in group evolution is the fact that values force in-group qualities to be valued in an irrational way. Arbitrary traditions, habits, rituals, and religions spawn from this judgement of value (Jones, 302-303). The way people can take their values, sometimes born from this arbitrary and tribal influence, creates a dangerous situation where decisions are made through “airy sciences”, as David Hume described them. These sciences are used but distorted and obscured by the irrational biases of the values – in this way, even very smart people can say and believe “weird things because they are skilled at defending beliefs they arrived at for non-smart reasons” (Shermer, 2002). These reasons must be understood to completely understand people and the organizations  they make up, as it has been by many administrators of the past – just see the political-administrative dichotomy to understand the need to separate personal and professional biases.

The very absurd world people live in is made even more tangled and irrational by the limits and biases within their own mind. Especially in the lense of groups and organizations, one can see the consequences and importance of understanding human nature. Bounded rationality, even when it is unable to be controlled, is of great importance to not only public administrators, but anyone hoping to collaborate with anyone else. Indeed, it is even detrimental to understanding one’s own behavior and necessary to a more rational if not better decision making in general. Though it may be impossible to make sense or even understand this absurd world completely as observed and described by Albert Camus, one can utilize a better understanding of human nature through Herbert Simon’s bounded rationality.

References

Camus, A., translation by Justin O’Brian (2018). The Myth of Sisyphus 2nd ed. New York: Vintage International.

Dawkins, R. (2006) The Selfish Gene. Oxford: Oxford University Press.

Dawkins, R. (2010) The God Delusion. Boston: Houghton Mifflin Co.

Fry, Brian R., and Jos C. N. Raadschelders. Mastering Public Administration: From Max Weber to Dwight Waldo. Los Angeles: Sage, 2014.

Selten, R. “What is Bounded Rationality” Dahlem Conference May 1999.

Jones, B. D. “Bounded Rationality” Annual Review of Political Science 1999 2. Pp 297-321.

Shermer, M. “Smart People Believe Weird Things” Scientific American (September 2002).

Simon, H. A. (1997) Administrative Behavior 4th ed. New York: The Free Press.

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