Against the myth: I Bounded rationality

While probably not even the most dogmatic mainstream economist believed that ”hyperrational” utility maximizing agent is a plausible model for describing human behavior, and the rational choice theory was attacked from different angles, still a new more realistic paradigm is gradually being emerged. Herbert Simon, who worked far from the mainstream, somewhat unexpectedly got the Nobel prize in economics in 1978, for introducing and propagating the concept of bounded rationality. A satisfactory, even not optimal solution is good. He coined the term satisficing by combining the words satisfy and suffice. We have to accept that our ability of making decisions is limited by a number of constraints, such as the complexity of a problem, limits on resources (most importantly, time and money), limited available information, our limited cognitive skills, values, influence by our feelings etc. As I learned in the soccer field in my childhood, ”there is no better position than a good one”.

There is a nice mathematical problem, officially called as the ”optimal stopping problem”. It helps to to answer when to stop dating and choose a long-term mate. The problem is analogue if an employer is trying to find a suitable new office manager from a range of applicants, so it is also known as the secretary problem. Let’s assume that you have a number of possible mates. I don’t want to tell this number, but if your name is not Don Giovanni, is much less than thousand and three (”Ma in Spagna son gia mille e tre”). As opposed to Don Giovanni, you suppose to have one relationship in one time. You should decide whether or not He’s The One, She’s The One. Much more often than not, you can’t go back to one of the people that you have rejected earlier. You might make two types of mistakes. You may bring a decision to settle down early, and and you will think in the future that maybe you missed the chance to meet the real queen of your life. Alternatively, it may happen that you wait too long to commit, and all the good
ones might be gone. So, here is the big question: when to stop? Math gives an answer for the magic number: 37%.51 The recipe You have the highest chance of finding Mrs. or Mr. Right, you should date and reject the first 37 percent of your potential mates. The rules has a second part. Pick the next person who is better than anyone you have ever dated earlier. (Yes, the algorithm does not guarantee for sure that you will not reject a wonderful option, so you need balance balances the risk of stopping too soon against the risk of stopping too late. Returning from romantic relationships to social science: with the words of the political scientist Bryan D Jones:

As Herbert Simon . . . notes, homo politicus is not irrational. He seems to behave
purposefully, adopting strategies that are relevant to general goals, given the limits
of cognitive capacity and the complexity of the political world. But these facets to
try to make it impossible to maximize and often inappropriate maximize. Homo
politicus seems to Simon to operate according to the model of bounded rationality,
that is, adopting means that are relevant to goals within environmental and cognitive processing limits.

 

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