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Edited by Peter G. Klein and Michael E. Sykuta
Chapter 9: Herbert Simon
9 Herbert Simon Saras Sarasvathy In a series of published and unpublished exchanges toward the end of the twentieth century, Herbert Simon and Oliver Williamson argued about the relationship between transaction cost economics (TCE) and behavioural economics. The exchange derived from personal biography as well as intellectual history and attested to differences not only of ideas but of world views. Augier and March (2001) provide one explanation for the disagreement in terms of a family quarrel about the degree to which one ought to assume unbounded rationality, opportunism, and conflict in the creation and sustenance of human organizations. Another aspect to the quarrel consists in the fact that Simon was not merely or even primarily an economist or social scientist. He was a Renaissance man, a polymath – deeply interested in how the human mind works and how that coheres with how the universe works. Opportunism, like unbounded rationality and conflict, did not make sense to him as fundamentals of human behaviour either empirically or historically and certainly not in terms of what we know about biological evolution. These concepts also did not make sense to him normatively, as guides for future action, for creatures consciously engaged in ‘designing’ their own environments, nor for scientists studying such creatures – scientists of ‘the artificial’ (Simon, 1996). Concepts such as bounded rationality, docility, and intelligent altruism were more interesting and fundamental to him, even if they were ‘messier’ because (i) they were empirically-based, and (ii) they were necessary to hold together a larger, more...
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