Bounded Rationality
People make decisions with limited time, information, and computational capacity.
The Mechanism: Herbert Simon's bounded rationality describes how decision-makers face limits in time, information, and cognitive capacity. They may satisfice by choosing an option that meets acceptable criteria rather than searching for a theoretical optimum.
The Philosophical Pivot: Rationality depends on the environment in which a choice is made. A person with limited time and poor information cannot be fairly judged by the standard of an all-knowing optimizer.
The Horizon: Organizations can improve decisions by changing environments: clarifying options, reducing unnecessary complexity, and making relevant evidence available.
Satisficing is not always wise; a low threshold can preserve a harmful status quo. The key is whether the decision-maker has enough information and meaningful alternatives.
What looks like an individual reasoning failure may be a system designed to make good reasoning expensive.
A person cannot optimize with information and time they do not have.
What decision am I calling irrational when the real constraint may be the environment in which it was made?