CILC2014 – 2nd International Conference on Interactivity, Language and Cognition, Jyväskylä, Finland, September 11-12 2014

1. September 10-12, 2014 — University of Jyväskylä, Finland
Bounded Rationality: Four
Critiques and an Update
Davide Secchi
Bournemouth University, UK
Emanuele Bardone
Tallinn University, Estonia
Institutions, Interactivity, Individuals
Second International Conference on Interactivity, Language, and Cognition

2. Table of Contents
• The concept: Issues and challenges
• The Good, the Bad, the Ugly, and the… Pessimist
• Is there light at the end of the tunnel?
• So, what?

3. Bounded Rationality
(BR)

5. Bounded rationality is a
theory about how individuals
make rational decisions

6. “[R]ationality is bounded when it falls
short of omniscience. And the failures of
omniscience are largely failures of
knowing all the alternatives, uncertainty
about relevant exogenous events, and
inability to calculate consequences.”
[Simon, 1979, p. 502]
Simon, H. A. (1979). Rational decision making in business organizations. American Economic Review, 69(4):493-513; Simon,
H. A. (1955). A behavioral theory of rational choice. Quarterly Journal of Economics, 69(1):99-118; Simon, H. A. (1997).
Administrative behavior. New York: The Free Press, 4th edition.

7. Herbert A. Simon, 1978
Despite an extremely wide literature—and three Nobel
Prizes on economics awarded around BR themes—
there has been little/scarce attention on BR’s
assumptions.
Daniel Kahneman, 2003
Reinhard Selten, 1994

8. the good

9. assumption what is critical
rationalistic
strict teleology of means and ends
brute-force strategy to problem solving
Simon, H. A. (1979). Rational decision making in business organizations. American Economic Review, 69(4):493-513; Simon,
H. A. (1955). A behavioral theory of rational choice. Quarterly Journal of Economics, 69(1):99-118; Simon, H. A. (1997).
Administrative behavior. New York: The Free Press, 4th edition; March, J. G. and Simon, H. A. (1958). Organizations. New
York: Wiley; Mousavi, S. and Garrison, J. (1992). Toward a transactional theory of decision making: Creative rationality as
functional coordination in context. journal of economic methodology. Journal of Economic Methodology, 10(2):131-156.

10. the bad

11. assumption what is critical
rationalistic
computationalism
strict teleology of means and ends
brute-force strategy to problem solving
old-fashioned calculation-based
computer metaphor of the mind
no emotions, intuition, creativity, etc.
when rationality in involved
Simon, H. A. (1993a). Altruism and economics. American Economic Review, 83(2):156-161; Sent, E.-M. (1997). Sargent
versus simon: Bounded rationality unbound. Cambridge Journal of Economics, 21:323-338.

12. the ugly

13. assumption what is critical
isolationism
the individual acts in a social and
bodily vacuum
information is neutral and quality
differentials are overlooked
rationalistic
computationalism
strict teleology of means and ends
brute-force strategy to problem solving
old-fashioned calculation-based
computer metaphor of the mind
no emotions, intuition, creativity, etc.
when rationality in involved
Langley, A., Mintzberg, H., Pitcher, P., Posada, E., and Saint-Macary, J. (1995). Opening up decision making: The view from
the black stool. Organization Science, 6(3):260-279; Patokorpi, E. (2008). Simon's paradox: Bounded rationality and the
computer metaphor of the mind. Human Systems Management, 27: 285-294.

14. the pessimist

15. assumption what is critical ...
negativity
BR has been developed as the
negative of FR and maintains, as a
theory, a negative definition of
rationality and human capabilities
the individual acts in a social and
bodily vacuum
information is neutral and quality
differentials are overlooked
rationalistic
computationalism
isolationism
strict teleology of means and ends
brute-force strategy to problem solving
old-fashioned calculation-based
computer metaphor of the mind
no emotions, intuition, creativity, etc.
when rationality in involved
Foss, N. J. (2003). Bounded rationality in the economics of organizations: `much cited and little used'. Journal of Economic
Psychology, 24; Patokorpi, E. (2008). Simon's paradox: Bounded rationality and the computer metaphor of the mind. Human
Systems Management, 27: 285-294; Harstad, R. M. and Selten, R. (2013). Bounded-rationality models: Talks to become
intellectually competitive. Journal of Economic Literature, 51(2):496-511.

16. almost seventy years
of research…

17. assumption what is critical How addressed
negativity
BR has been developed as the
negative of FR and maintains, as a
theory, a negative definition of
rationality and human capabilities
the individual acts in a social and
bodily vacuum
information is neutral and quality
differentials are overlooked
rationalistic
computationalism
isolationism
strict teleology of means and ends
brute-force strategy to problem solving
old-fashioned calculation-based
computer metaphor of the mind
no emotions, intuition, creativity, etc.
when rationality in involved
Biases and prejudices
Heuristics
Emotions
Ambiguity
Early developments and uses
of the concept
Bazerman, M. H. (1994). Judgement in managerial decision making. New York: Wiley, 3 edition; Kahneman, D. and Tversky,
A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2):263-292; Camerer, C., Loewenstein, G.,
and Weber, M. (1989). The curse of knowledge in economic settings: An experimental analysis. Journal of Political Economy,
97:1232-1254.

18. assumption what is critical How addressed
negativity
BR has been developed as the
negative of FR and maintains, as a
theory, a negative definition of
rationality and human capabilities
the individual acts in a social and
bodily vacuum
information is neutral and quality
differentials are overlooked
rationalistic
computationalism
isolationism
strict teleology of means and ends
brute-force strategy to problem solving
old-fashioned calculation-based
computer metaphor of the mind
no emotions, intuition, creativity, etc.
when rationality in involved
Biases and prejudices
Heuristics
Emotions
Ambiguity
Early developments and uses
of the concept
Gigerenzer, G. and Selten, R. (2001). Bounded Rationality. The Adaptive Toolbox. Cambridge, MA: MIT Press; Gigerenzer,
G., Todd, P., and Group, A. R. (1999). Simple Heuristics That Make Us Smart. New York: Oxford University Press.

19. assumption what is critical How addressed
negativity
BR has been developed as the
negative of FR and maintains, as a
theory, a negative definition of
rationality and human capabilities
the individual acts in a social and
bodily vacuum
information is neutral and quality
differentials are overlooked
rationalistic
computationalism
isolationism
strict teleology of means and ends
brute-force strategy to problem solving
old-fashioned calculation-based
computer metaphor of the mind
no emotions, intuition, creativity, etc.
when rationality in involved
Biases and prejudices
Heuristics
Emotions
Ambiguity
Early developments and uses
of the concept
Ariely, D. and Loewenstein, G. (2006). The heat of the moment: The effect of sexual arousal on sexual decision making.
Journal of Behavioral Decision Making, 19(2):87-98; Hanoch, Y. (2002). `Neither an angel nor an ant:' emotion as an aid to
bounded rationality. Journal of Economic Psychology, 23:1-25; Hanoch, Y., Wood, S., and Rice, T. (2007). Bounded
rationality, emotions and older adult decision making: Not so fast and yet so frugal. Human Development, 50:333-358.

20. assumption what is critical How addressed
negativity
BR has been developed as the
negative of FR and maintains, as a
theory, a negative definition of
rationality and human capabilities
the individual acts in a social and
bodily vacuum
information is neutral and quality
differentials are overlooked
rationalistic
computationalism
isolationism
strict teleology of means and ends
brute-force strategy to problem solving
old-fashioned calculation-based
computer metaphor of the mind
no emotions, intuition, creativity, etc.
when rationality in involved
Biases and prejudices
Heuristics
Emotions
Ambiguity
Early developments and uses
of the concept
March, J. G. (1976). The technology of foolishness. In March, J. G. and Olsen, J. P., editors, Amiguity and Choice in
Organizations. Universitetsforlaget, Bergen; March, J. G. (1978). Bounded rationality, ambiguity and the engineering of
choice. Bell Journal of Economics, 9:587-608.

21. a more distributed
approach

22. Rationalism
• Distributed cognition allows lousy relations between
means and ends
• ends (objectives) can be defined and re-defined
as the cognitive process designs itself
• means (or cognitive resources) shape both the
process and ends
• The brute-force strategy is not the only one
possible in a distributed cognitive system
Magnani, L. (2007). Morality in a technological world. Knowledge as a duty. New York: Cambridge University Press. Magnani,
L. (2009). Abductive Cognition. The Epistemological and Eco-Cognitive Dimensions of Hypothetical Reasoning. Berlin:
Springer.

23. Computationalism
• A distributed cognitive approach would allow
strategies other than computation:
• emotions, intuitions, time-based interactions,
etc.
• It definitely abandons the computer (or other
mechanistic parallels) as a viable metaphor of the
brain
Cowley, S. J., & Vallée-Tourangeau, F. (Eds.) (2013). Cognition beyond the brain. London: Springer; Hutchins, E. (1995).
Cognition in the Wild. Cambridge, MA: MIT Press.

24. Isolationism
• A distributed cognitive approach is founded on:
• cultural environments/niches
• social agencies and socializations
Bardone, E. (2011). Seeking Chances. From Biased Rationality to Distributed Cognition. New York: Springer. Clark, A. (2008).
Supersizing the mind. Embodiment, action, and cognitive extension. New York: Oxford University Press, 3rd edition; Clark, A.
and Chalmers, D. J. (1998). The extended mind. Analysis, 58:7-19; Secchi, D. and Bardone, E. (2009). Super-docility in
organizations. An evolutionary model. International Journal of Organization Theory and Behavior, 12(3):339-379; Secchi, D. &
Bardone, E. (2013a). Socially distributed cognition and intraorganizational bandwagons: Theoretical framework, model, and
simulation. International Journal of Organization Theory and Behavior , 16(4), 521-572.

25. Negativity
• Given the dynamic and highly unpredictability of a
distributed cognitive system,
• the emphasis is on potentials for rationality to
expand
• boundaries are no more the defining elements of
rational dynamics but the way they move (or are
re-positioned due to interactions) is
Secchi, D. (2013). Symposium on socially-distributed rationality and decision making: Introduction. International Journal of
Organization Theory and Behavior , 16(3), 360-367. Secchi, D. (2011). Extendable rationality. Understanding decision making
in organizations. New York: Springer

26. concluding remarks

27. • Some of the basic assumptions of BR are
fundamentally anchored to the way science was
positively defined in the XX Century
• There exist many ad hoc solutions to the four
(problematic) assumptions we analyzed
• The adoption of a distributed cognition approach
would undermine the most fundamental axiom of
BR (internal vs external bounds)

28. • What we propose in this paper puts forward a view
that updates BR
• If implications of this approach are fully developed,
we believe we can get to a different understanding
of what is rational decision making
• More theoretical and empirical research is needed
to define what this actually means

29. thank you very much