Who Was Herbert A. Simon?

Who Was Herbert A. Simon?

Let me introduce you to Herbert A. Simon, who lived from 1916 to 2001 and was an American economist and political scientist. He earned the Nobel Memorial Prize in Economic Sciences in 1978 for his pivotal work in modern business economics and administrative research. You should know him primarily for the theory of bounded rationality, which explains that people don't make perfectly rational decisions due to cognitive limitations—like the challenge of gathering and processing all necessary information—and social factors, such as relationships and ties with others.

Simon completed his Ph.D. at the University of Chicago in 1943. After that, he took on research roles and teaching positions at various universities before settling at Carnegie Mellon University in 1949. He spent over 50 years there as a professor in administration, psychology, and computer science. He even helped establish several departments and schools at Carnegie Mellon, including the Graduate School of Industrial Administration, now called the Tepper School of Business.

Beyond the Nobel, Simon received the A.M. Turing Award in 1975 for his advancements in computer science, particularly in artificial intelligence. He also earned the U.S. National Medal of Science in 1986. Throughout his career, he wrote dozens of journal articles and 27 books, such as 'Administrative Behavior' in 1947, 'The Sciences of the Artificial' in 1968, and 'Models of Bounded Rationality' in 1982.

Herbert A. Simon and Bounded Rationality

You need to understand how Herbert A. Simon's theories on economic decision-making directly challenged classical economic ideas, including notions of rational behavior and the individualistic 'economic man.' Instead of assuming that people act rationally with all available information to optimize outcomes, Simon argued that decision-making focuses on achieving results that are simply 'good enough' based on limited information and considering others' interests. He termed this 'satisficing,' blending 'satisfy' and 'suffice.'

As Simon explained, humans can't access or process every piece of information for fully rational choices, so they use what they have to reach a satisfactory outcome—he called these 'cognitive limits.' Beyond that, he highlighted how personal relationships and social structures restrict decisions, meaning individuals don't just pursue their own utility but must negotiate, wield power, or navigate others' interests and institutional rules.

These cognitive and social constraints form the core of bounded rationality theory. Under this framework, decision-makers settle for satisfactory solutions while being aware of how others in an organization handle their own challenges. Even within these limits, decisions can be rational by weighing costs, benefits, and risks. This theory became foundational in behavioral economics, which often questions the true rationality of human choices. When the Royal Swedish Academy of Sciences gave Simon the Nobel, they noted that his ideas underpin much of modern business economics and administrative research, replacing the all-knowing entrepreneur with cooperating decision-makers facing informational, personal, and social barriers.

Herbert A. Simon and Artificial Intelligence

Consider Herbert A. Simon a true pioneer in artificial intelligence foundations. In the mid-1950s, he collaborated with Allen Newell from the Rand Corporation to simulate human decision-making on computers. By 1955, they had developed a program capable of proving mathematical theorems, which they dubbed their 'machine that thinks.' This work laid early groundwork for AI by attempting to replicate human thought processes through computation.