(born June 15, 1916)
Nobel Prize in Economics 1978
American economist, sociologist and educator Herbert Alexander Simon was born in Milwaukee (Wisconsin). He was the second son of Arthur and Edna (née Merkel) Simon. His father, an electrical engineer, inventor and patent lawyer, emigrated from Germany in 1903. Her mother, a representative of the third generation of Americans, whose ancestors came from Germany and the modern Czech Republic, was a pianist-accompanist. In Milwaukee high school S. received, according to him in my own words, general education, supplemented by in-depth self-education. The atmosphere in the house stimulated intellectual development children. The dinner table served as a place for discussion and debate - often political, sometimes scientific. Impressed by the ideas of his uncle Harold Merkel, who died early, who left work in economics and psychology, S. aroused an interest in the social sciences.
By 1933, when S. entered the University of Chicago, he decided to become a mathematician in the field social sciences. His main mentor at the university was the econometrician and mathematical economist G. Schultz. The training course also included logic, mathematics, biophysics, and political sciences. While studying physics as an undergraduate, S. showed a lifelong interest in the philosophical problems of physics and subsequently published several articles on these problems.
Having received a bachelor's degree in 1936, S. spent the following years working as a research assistant at the University of Chicago and worked on problems of municipal government. In 1938-1939 he worked for the International Association of City Administrators in Chicago. His first articles on the problem of quantitative assessment of municipal activities, published in the late 30s, served as the basis for S.’s appointment in 1939 as the head of a research group at the University of California, dealing with similar topics. Three years later, after the expiration of the period for which the research funds were allocated, S. returned to Chicago to continue his graduate studies. Along with his studies, he worked from 1942 to 1949, first as an assistant professor and then as a professor of political science at the Illinois Institute of Technology. After receiving his doctorate in 1943, S. remained at the University of Chicago.
His participation in the activities of the Coles Commission for Economic Research had a significant influence on the further development of S. as a scientist. At that time, J. Marshak, T. Koopmans collaborated in it, and they involved the then university students K. Arrow, L. Klein, and D. Patinkin in the research work. ODange, M. Friedman and F. Modigliani also took an active part in the seminars organized by the Commission. In 1946, S. was appointed head of the department of political sciences. In 1948, he briefly joined the government administration, taking the post of one of the assistants to the United States government, and took part in the creation of the Economic Cooperation Administration, formed to implement the Marshall Plan - to provide assistance to Western European countries for their economic recovery after the 2nd World War.
In 1949, S. moved from Chicago to Pittsburgh, where he assisted in organizing a new High school in Industrial Administration at Carnegie Mellon University. There he became a professor of management. Since 1965, he has been a professor in the Department of Computational Sciences and Psychology. While occupying this position, S. led research work in the field of psychology, information theory, computer modeling of cognitive processes, organization theory, artificial intelligence and decision theories. His contributions to economics are primarily related to his work on the theory of decision making in economic systems ah - a relatively new area of economic research.
In 1947, the book “Administrative Behavior” was published, which sets out an innovative approach to the problems of decision-making in the field of organization and production management. This topic, called “administrative behaviorism,” became key in subsequent years. research activities C. Subsequently, it included many other aspects and took shape in the concept of “economic behaviorism.” In his book, S. replaced the classical entrepreneur with a group of decision-makers and collaborating leaders, whose abilities for rational action are limited by a lack of knowledge about all the consequences of their decisions, as well as by their personal and social connections. S. described the business firm as adaptive system, including material, human and social components, interconnected by a communication network and the common desire of its members to cooperate with each other to achieve common goals. S. rejected the idea of a firm, considered classical in economic theory, as a rationally operating enterprise whose goal is only to maximize profits. Since decision makers cannot choose the best alternative, such a decision-making process can result in, at best, only satisfactory, but not the most optimal, options. Based on this, S. formulated a new conclusion for that time that firms do not set themselves the goal of maximizing profits, but finding acceptable solutions to the acute problems that arise before them. This often leads them to set goals that challenge conflict situations. S.'s book “Administrative Behavior” is considered a classic work in the field of organization theory and decision making. The theory of the decision-making process developed by S. in various organizations and his empirical studies of this process have found practical application in management methods, production and financial planning used by managers of private and public organizations in the United States. Work on studying the process of making complex decisions forced S. to go beyond the boundaries of economic theory itself and use the methods of other sciences, in particular psychology. This manifested itself in his next works.
In the books “Models of man” (“Models of man”, 1957) and “Organizations” (“Organizations”, 1958), S. supplemented and developed the ideas put forward earlier. He argued that classical decision theory lacked an important element, namely a description of the behavior and cognitive qualities of people who process information and make decisions. J. March, an employee of S-, who helped conduct field research, said that S. “paid attention primarily to the limitations of human memory and his inability to calculate, considering these qualities to be obvious obstacles to absolutely rational behavior.” With this conclusion, S. attracted the attention of other scientists who carried out related research, as a result of which a collective concept arose, which can be called the theory of limited, or “forced” rationality (“bounded rationality”). In the strict sense of the word, these studies, according to March, were not a theory, but rather a set of observations within the framework of traditional behavioral theory.
Many of S.'s later studies were devoted to the problems of artificial intelligence and computerization of science. Back in 1952, communication with A. Newell, who was then a researcher at the famous RAND Corporation, spurred his interest in these issues. They began to conduct research together on decision-making problems using computer simulations, and over time this area became central to scientific activity S. Together with A. Newell, he was also one of the first to study the problem of artificial intelligence in the 60s. published a significant number of articles on this problem.
In 1961, Newell joined S. after moving to a professorship at Carnegie Mellon University. In 1972, they jointly published the seminal work “Human Problem Solving.” It formulated the rules of human behavior in the decision-making process. True, these rules described the behavior of individuals during a laboratory experiment and their conclusions could not be directly applied to economic agents operating in a real market or in other complex situations. Nevertheless, it was S. who took the first step in organizing analytical work in the field of decision theory at the microeconomic level. In addition to empirical research in the field of decision theory in business, as well as business psychology, S. made significant contributions to the problem of aggregation of microsystems. He saw the solution to the problem in dividing the entire system (for example, the economy at the national level) into a significant number of subsystems, each of which could be analyzed independently of the others. It was assumed that the relationships between subsystems can be considered without taking into account internal structures these subsystems. A similar simplification was borrowed by S. from natural sciences, where analysis at the macrostructure level considers microstructures as given elements, while microstructure analysis ignores interactions between very distant objects.
S. is known in the USA as a talented popularizer and active promoter of universal computer literacy and the widest use of computers in various areas of society. His approaches to these issues are outlined in the book “The Shape of Automation for Men and Management” (1965). The book was based on the popular series of lectures by S. “The New Science of Management Decisions.” S. rather harshly assessed the possible social consequences of the process of general computerization (including business and the economy as a whole). He showed that the “massive flow of computers” will lead to saturation of the market for goods and services, and this, in turn, will cause unemployment, especially among those who have not been included in the general process of computerization and who will directly feel the “cold embrace of the machine”, since, S. emphasizes, “it was not the machines or the tractor that destroyed the horse, but the man.”
S.'s ideas were criticized, in particular by economists E. Mason, F. Machlup and M. Friedman. While highly appreciating the merits of S.'s descriptive theory of decision making, they at the same time expressed doubt about its value for real economic analysis. In addition, S.'s conclusions regarding the decision-making process undermined, from their point of view, the fundamental principles of the theory of general equilibrium, as well as the postulates of maximization and optimization of the profit and utility function on which this theory is based. However, these approaches, which seem irreconcilable at first glance, relate to different complexes and levels of problems in economic theory and therefore can be considered as complementary. S. showed the area of empirical testing of hypotheses on which the decision-making process is based.
The Alfred Nobel Memorial Prize in Economics for 1978 was awarded to S. “for his pioneering research into the decision-making process in economic organizations.” During the presentation and presentation of the award, S. Carlson, a member of the Royal Swedish Academy of Sciences, emphasized that “the study of the structure of the Firm and internal decision-making has become an important task of economic science. And in this new area of research, S.’s work turned out to be extremely valuable. Theories and observations
C. in the field of decision-making within economic organisms are fully applicable to the systems and techniques of planning, budgetary work and control that are used both in business and in public administration. They therefore form an excellent basis for empirical research.”
In his autobiographical essay, S. noted that “in the strategy of scientific research that flowed from my activities, I adhered to two guiding principles - to strive for greater “rigor” in the social sciences, so that they were better equipped with the tools necessary to solve the difficult problems facing them and to promote close interaction between natural and social scientists so that they can jointly apply their specialized knowledge and skills to those many complex public policy issues that require both types of wisdom.”
In 1937, S. married Dorothy Pye. They have a son and two daughters. He enjoys walking, mountain climbing, painting and playing the piano. Speaks several languages fluently.
In addition to the Nobel Prize, S. received the American Psychological Association Award for Outstanding Contributions to Science (1969). He is a member of the American Economic Association, the American Psychological Association, the Econometric Society, the American Sociological Association, and the American National Academy of Sciences. He was awarded honorary degrees by the universities of Chicago, Yale, McGill, Lund and them. Erasmus (Rotterdam, Netherlands).
Works: On the application of the theory of tracking systems to study production regulation processes // Regulation processes in models of economic systems. M., 1961; Artificial Sciences. M., 1972; Methodological foundations of economics // System Research. Methodological problems. Yearbook. 1989-1990. M.: Nauka, 1991. P. 91-100; Rationality as a process and product of thinking // THESIS. 1993. T. 1. Issue, 3. P. 16-38; Decision-making theory in economic theory and behavioral science // Theory of the firm. St. Petersburg, 1995. pp. 54-72.
Measuring Municipal Activities // International City Managers’ Association. 1938 (jointly with C.W. Ridley); Administrative Behavior: A Study of Decision-Making Processes in Administrative Organization. New York, 1947; Public Administration. New York, 1950 (co-author); Models of Man. New York, 1958; Organizations. New York, 1958 (with D.G. March); The New Science of Management Decision. New York, 1960; The Sciences of the Artificial. Cambridge, London, 1969; Human Problem Solving. Englewood Cliffs, New York, 1972 (with A. Newell); Models of Discovery and Other Topics in the Methods of Science. Dordrecht, 1977; Models of Thought. New Haven, London, 1979; Models of Bounded Rationality. Vol. 1-2. Cambridge, London, 1982; Reason in Human Affairs. Stanford, 1983; Bibliographic von Herbert A. Simon. Brussels, 1985.
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ABSTRACT
in the discipline: "Institutional Economics"
on the topic of: " Herbert Simon and his concept of bounded rationality"
Completed by: E.S. Drobakhina, 2nd year student
full-time education of the faculty
economics, group Eb02/1302
Checked by: S.M. Karanets, associate professor
St. Petersburg, 2015
Introduction
Chapter 1. Biography
Chapter 2. Works and merits
Conclusion
IN modern conditions In a rapidly developing economy, decision-making mechanisms and processes are important aspects not only of the effectiveness of organizational management, but also of the activities of an individual entity. Moreover, human behavior almost always contains a significant rational component. The fundamental premise is the thesis about the ability to adapt means to goals, act in accordance with tasks and prevailing circumstances, and choose the best of alternative options.
To date, quite a lot of schools have emerged that describe the decision-making process in various areas of the economy (most often within organizations and firms, but also in relation to households). One of the most significant among them is behavioral economic theory. This theory attempts to explore the actual behavior of economic actors and seeks to build a generalized model of decision making. The recognized founder of behavioral economic theory is considered Nobel laureate, American economist, professor of psychology and computer science Herbert Simon. Studying the problem of creation scientific foundations managerial behavior and decision-making in large organizations, he devoted his whole life and put a lot of effort into convincing his colleagues, other economists, that their idea of an “economically thinking person” as a calculator, calculating costs and profits with lightning speed, is not corresponds to reality.
The approach developed by G. Simon is applicable in cases where the full application of a rational model is impossible due to lack of time, insufficient initial information or the lack of ability to effectively process or analyze this information (methods, models, personnel competencies). In this case, to determine the strategy, not all possible alternatives are considered, but only some (usually a relatively small) part of them. At the same time, people do not strive to build an optimal strategy, but try to find some acceptable option - not necessarily optimal, but at the same time satisfying everyone.
The purpose of my work is to study the theory of bounded rationality developed by G. Simon.
Chapter 1. Biography
American political scientist, economist, sociologist and psychologist, professor - primarily at Carnegie Mellon University - whose research has covered many areas, including cognitive psychology, cognitive science, theory of computers and systems, public administration, economics, management, philosophy of science, sociology and political science. Simon is the author of nearly a thousand highly acclaimed publications and one of the most influential social scientists of the last century. Nobel Prize winner in economics (1978).
Herbert Alexander Simon was born on June 15, 1916 in Milwaukee, Wisconsin (Milwaukee, Wisconsin), in Jewish family. His father, an electrical engineer, inventor and holder of several dozen patents, came to the United States from Germany in 1903. Simon's mother was a gifted pianist. Herbert attended public school, which instilled in him a penchant for science. The boy found studying entertaining, but very easy. His interest in studying human behavior was influenced by his mother's younger brother, who studied economics at the University of Wisconsin-Madison. While still a schoolboy, Herbert read his uncle’s books on economics and psychology, discovering the field of social sciences for himself. In 1933, Simon entered the University of Chicago, where he studied social sciences and mathematics. He was very interested in biology, but because of his color blindness and his awkwardness in the laboratory, he did not dare to take it up, preferring to concentrate on political science and economics. In 1936, Simon received his bachelor's degree and in 1943 he defended his doctorate in organizational decision making at the same University of Chicago, where he studied under the supervision of Harold Lasswell and Charles Edward Merriam.
From 1939 to 1942, Simon was director of a research group at the University of California, Berkeley, and when the fellowship ended, he joined the faculty of the Illinois Institute of Technology, where he taught political science from 1942 to 1949 , and also headed the department. Returning to Chicago, the young scientist began a deeper study of economics in the field of institutionalism. In 1949, Simon became a professor of administration and chair of the department of industrial management at the Carnegie Institute of Technology, which later became Carnegie Mellon University, and continued to teach in various departments of the university, taking advantage of the breadth of his scientific interests, until his death. Simon died on February 9, 2001, at the age of 84, in Pittsburgh, Pennsylvania.
Simon was a polymath who rightfully occupied his place among the founding fathers of several important scientific fields today, studying the problems of artificial intelligence, information processing, decision making, problem solving, attention economics, organization theory, complex systems and computer modeling scientific discovery. He was the first to introduce such concepts as “bounded rationality” and “satisficing”, he was the first to analyze the nature of organized complexity and proposed the mechanism of “preferential attachment” to explain the distribution of power-law dependence.
Chapter 2. Works and merits
Simon began researching industrial organizations, and one of his many findings was evidence that the internal organization of a firm and its decisions regarding behavior in foreign markets had little correspondence with neoclassical theories of “rational” decision making. In his numerous works after the 1950s. Simon paid close attention to decision-making issues, and eventually put forward a theory of behavior based on “bounded rationality.” He argued that workers face uncertainty about the future and uncertainty about the costs of obtaining information in the present. Thus, these two factors limit the ability of workers to make fully rational decisions. Simon argued that they can only make "boundedly rational" decisions, and are forced to make decisions according not to "maximization", but only to "satisfaction", that is, setting a certain level at which they will be completely satisfied, and if it is impossible to achieve this level, they will either lower the level of their claims or change their decision. These "rules of thumb" determine those best results that can be achieved in the "limited" and uncertain real world.
In the books “Models of Man” (1957), “Organization” (1958), “The New Science of Management Decision Making” (1960), G. Simon deepens the theories put forward in the “Administrative Introduction”, coming to the conclusion that in the classical theory of decision making solutions are missing one important element that takes into account the behavioral and cognitive qualities of people who collect, process information and make decisions. In addition, he drew attention to the fact that a person’s memory and ability to calculate are limited, and this interferes with their absolutely rational behavior and making ideal decisions. Later G. Simon developed these ideas into fundamental works"Models of Discovery and Other Topics in Scientific Methods" (1977), "Models of Thinking" (1979), "Models of Coherent Rationality" (1982, 2 vols.), "Reason in human activity"(1983), "Models of Man: Social and Rational" (1987). Here his research merged with the research of other scientists, who together gave rise to the collective concept of "bounded" or "bound rationality". In general, as G. Simon himself noted, he always preferred to adhere to "two guiding principles": first, to strive for greater "rigor" in the social sciences, making efforts to better equip them with the tools necessary to solve the problems facing them. Secondly, to "promote close interaction between natural and social sciences so that they can bring together their specialized knowledge and skill in solving those varied and complex issues of public policy that require both types of wisdom."
Simon's services to world science have been crowned with many awards:
· the 1975 Turing Award for "fundamental contributions to artificial intelligence, the psychology of human perception, and list processing," given by the Association for Computing Machinery (ACM); · Nobel Prize in Economics 1978 for "pioneering research into decision-making within economic organizations"; · US National Medal of Science 1986; · Award from the American Psychological Association (APA) for “outstanding contributions to psychology” in 1993. Chapter 3. The concept of "bounded rationality"
In 1978, Herbert Simon received the Nobel Prize in Economics for his theoretical contributions to management science - the theory of bounded rationality. Since the late 40s. Herbert Simon introduced the concept of so-called “bounded rationality” into scientific circulation. The concept of “bounded rationality” refers to the purposeful actions of a political or economic entity, carried out by it in conditions when making the most effective decisions is difficult due to the lack of time, information, and insufficient resources. The concept of limited reality, proposed by G. Simon, is based on three premises: Political or economic actors are limited in their ability to define goals and calculate the long-term consequences of their decisions, which is due both to their mental abilities and to the complexity of the environment that surrounds them. Political or economic entities try to realize their goals and solve the tasks assigned to them not all at once, but sequentially. Political or economic actors set goals of a certain level - lower than the maximum possible for them (for example, many company owners do not at all strive to maximize the income of their company. Instead, they try to bring their own income to a level that would allow them to occupy the desired social position, and, having achieved the goal, stop). In other words, individuals in their behavior are guided by the principle of satisfaction. Analyzing the problem of how a person constructs a model of a rational system, G. Simon deepens the theory and, on its basis, moves to the conclusion about the limitations human intelligence. The limitation that G. Simon attributes to the human mind as its integral property, on the contrary, is a limitation consciously realized by an economic entity, taking into account the index of time and available information. As a result, from the point of view of G. Simon, the rationality of the subject is limited because he cannot play the role of an “absolute calculator”. On the other hand, if the restrictions within which the economic entity is located are very weak, then a range of positive solutions immediately arises, and the problem becomes the problem of optimal choice from the range of these solutions. If we maximize the objective function, then we will immediately have the classical concept of economic rationality. If we choose the restrictions themselves in such a way that the solution is unique, then the natural question is to determine those restrictions that do not involve addressing such an economic reality. Thus, G. Simon actually creates a kind of illusion of solving the problem within the framework of his concept, transferring the same problem to the area of selection of restrictions, which, in his opinion, is the final stage of this concept. However, the solution does not appear to be explicitly adequate, since the task of choosing constraints is not final, but, on the contrary, central; that is, willingly or unwillingly, G. Simon rearranges priorities in his concept. simon concept bounded rationality Conclusion
According to G. Simon, the most famous proponent of the concept of bounded rationality, in real conditions of uncertainty and time constraints, when making a decision, a person does not try to implement the optimal option that maximizes his utility, but searches until the first acceptable (satisfactory) one is found. option. Consequently, people do not, in principle, maximize, but rather determine an acceptable level of satisfaction (“aspiration level”). If this level is reached, then they stop the process of searching for other alternatives. It is easy to see that the choice of a satisfactory option requires much less information and counting tools from the economic entity than in the neoclassical model. In other words, an economic entity does not have to have complete and accurate information about the outcome of a given option and compare it with the outcomes of alternative options within general function usefulness, just a subconscious, intuitive idea that a given option is higher or lower than the acceptable level of satisfaction is enough. List of sources used
1.Simon G. Rationality as a process and product of thinking // THESIS Vol. 3. 1993. 2.Blaug M.100 great economists after Keynes. Per. edited by Storchevoy. - St. Petersburg: Economic School, 2008. - 384 p. 3.http://gallery. economicus.ru/cgi-bin/frame_rightn. pl? type=in&links=. /in/simon/brief/simon_b1. txt&img=brief. gif&name=simon
)
William Procter Award for Scientific Achievement (1980)
Gibbs Lecture (1984)
US National Medal of Science (1986)
Harold Pender Award (1987)
Von Neumann Theoretical Prize (1988)
Herbert Alexander Simon(English) Herbert A. Simon; June 15, Milwaukee - February 9, Pittsburgh) - American scientist in the field of social, political and economic sciences, one of the developers of the Newell-Simon hypothesis.
Biography
Father of Jewish descent, mother with Jewish, Lutheran and Catholic roots.
In 1936 he received a bachelor's degree and in 1943 a doctorate in political science from the University of Chicago, which was also his first place of work as a research fellow (1936-1938). Since 1942 he was a teacher at the Illinois Institute of Technology, and in 1947 he became a professor of political science there. In 1949 he began teaching at Carnegie Mellon University in Pittsburgh, first as professor of management and psychology (1949-1955), then professor of computer science and psychology. He held his last position until his retirement in 1988.
Scientific creativity
He had a significant influence on the development of organization theory, management and management decisions. His work in the field of computer technology and artificial intelligence had a significant impact on the development of cybernetics.
G. Simon's main efforts were aimed at fundamental research into organizational behavior and decision-making processes. Rightfully considered one of the creators modern theory management decisions (theory of bounded rationality). The main results he obtained in this area are presented in books such as "Organizations"(with James March), published in 1958, as well as "Administrative Behavior" And "The New Science of Management Decisions" ().
G. Simon's significant theoretical contribution to management science received worthy recognition in 1978, when he was awarded the Nobel Prize in Economics “for his pioneering studies of the decision-making process in economic organizations and firms.”
Herbert Simon did not read newspapers or watch television because he believed that if something really important happened, someone would definitely tell him about it, so there was no point in wasting time on the media.
Bibliography
- "Administrative Behavior" (Administrative Behavior, 1947);
- Models of Man (1957).
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Notes
Literature
- Blaug M. Simon, Herbert // 100 great economists after Keynes = Great Economists since Keynes: An introduction to the lives & works of one hundred great economists of the past. - St. Petersburg. : Economicus, 2009. - pp. 252-255. - 384 p. - (Library " Economic School", vol. 42). - 1,500 copies. - ISBN 978-5-903816-03-3.
- (English) . - article from Encyclopædia Britannica Online. Retrieved June 13, 2014.
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