On the origins and consequences of Simon’s modular approach to bounded rationality in economics

Enrico Petracca

The European Journal of the History of Economic Thought, 2021, vol. 28, issue 5, 708-732

Abstract: This paper discusses why in the 1950s Herbert Simon introduced bounded rationality as a modular notion—consisting of a “cognitive” and an “environmental” module—and explores the consequences of this choice. Originally, Simon emphasised cognition in economics and the environment in psychology to meet specific disciplinary interests. Continuing adaptively to emphasise cognition in economics has led, then, to significant unintended consequences: (i) the easier assimilation of Simon’s bounded rationality by neoclassical economics, and (ii) the persistent confusion between Simon’s and Kahneman and Tversky’s contribution. Seeing the recognition of his credit endangered, Simon reemphasised the environment when Gigerenzer introduced environment-based ecological rationality.

Date: 2021
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DOI: 10.1080/09672567.2021.1877760

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