Bounded Rationality ─ The Adaptive Toolbox

In a complex and uncertain world, humans and animals make decisions under theconstraints of limited knowledge, resources, and time. Yet models of rational decision making ineconomics, cognitive science, biology, and other fields largely ignore these real constraints andinstead assume agents with perfect information and unlimited time. About forty years ago, HerbertSimon challenged this view with his notion of "bounded rationality." Today, bounded rationality hasbecome a fashionable term used for disparate views of reasoning.This book promotes boundedrationality as the key to understanding how real people make decisions. Using the concept of an"adaptive toolbox," a repertoire of fast and frugal rules for decision making under uncertainty, itattempts to impose more order and coherence on the idea of bounded rationality. The contributorsview bounded rationality neither as optimization under constraints nor as the study of people?sreasoning fallacies. The strategies in the adaptive toolbox dispense with optimization and, for themost part, with calculations of probabilities and utilities. The book extends the concept of boundedrationality from cognitive tools to emotions; it analyzes social norms, imitation, and othercultural tools as rational strategies; and it shows how smart heuristics can exploit the structureof environments.

Reinhard Selten is Professor at the University of Bonn. He is a cowinner of the 1994 Nobel Prize in Economics.