How do we make decisions? Herbert A. Simon, Nobel Laureate, 1978

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At a glance

Born: 1916, Wisconsin, USA

Died: 2001, Pennsylvania, USA

Field: Decision economics

Awarded: The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 1978

Prize-winning work: Pioneering research into the decision-making process within economic organizations

  

Herbert A. Simon made a number of profound contributions to society, and even laid the groundwork for fields such as artificial intelligence and cognitive psychology. He remains most famous for the concept of organizational decision-making (as it is known today), including the idea of 'bounded rationality.'

His belief, which goes against the principles of classical economics, was that humans do not seek to maximize their benefit from a particular course of action. He argued instead that people tend to take shortcuts and 'satisfice' (a combination of two words: 'satisfy' and 'suffice') to reach a 'good enough' outcome rather than the best one possible.

What does Simon's work mean for us?

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"It isn’t sensible for everyone in a large organization to think about every challenge the organization faces. Instead, smaller teams focus on smaller tasks - it’s a logical way to get things done.”

Tim Harford
Financial Times columnist and author of
The Undercover Economist

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“Disagreements within a large company is part of what Simon’s Nobel laureate was all about. It is also something that investors need to be doubly aware of.”

Paul Donovan
Global Chief Economist
UBS Wealth Management

Herbert A. Simon on…

...developing childish wonder in students.

...the early days of artificial intelligence.

"In 1956 my research had switched considerably so that I was mostly concerned with trying to write programs for computers that would simulate human thinking."

From Simon’s personal collection

Herbert A. Simon

Main image: Scribbled notes on the differences between creativity in the arts and the sciences 

Herbert A. Simon

Top: Musings on the concepts of intuition and genius

Bottom: He reveals his artistic side with this typewritten poem

A closer look at the theory

Why is decision making so difficult?

How do we make decisions?

How does altruism benefit organizations?

How can we study the process of creativity?

What is intuition?

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Nobel Laureate, 1985

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