bounded rationality


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bounded rationality

a model of human action in which choices are seen as limited and imperfect in terms of knowledge of the situation and expected outcomes; action is therefore never completely rational. The concept originated in the work of March and Simon (1958) and Simon (1957a & b) on DECISION MAKING in organizations. Their work was critical of the model or IDEAL TYPE of perfect rationality presented in economic theories of the firm; in contrast to the assumption of profit maximization in economic theory March and Simon argued that actual behaviour in organizations was SATISFICING rather than ‘optimizing’ in terms of the achievement of goals. This approach to ‘subjective rationality’ has been influential in the sociology of organizations (see ORGANIZATION THEORY) because it demonstrated the way in which organizational structure (DIVISION OF LABOUR, SOCIALIZATION, AUTHORITY) and channels of communication limit the range of solutions considered.