Bounded rationality, satisficing and the evolution of economic thought

The development of economic thought about the concept of bounded rationality is briefly outlined in this chapter. The evolution of this thought (it is contended) has been important in fostering contemporary research in behavioural and psychological economics, as well as in experimental economics. Attention is given to the meanings of the concept of rationality and their relevance to behavioural models, particularly economic ones. Models of ecological rationality are given special consideration. Satisficing versus optimizing approaches to modelling bounded rationality are assessed. The importance is emphasized of recognizing the existence of different types (categories) of models of bounded rationality. It is claimed that all these models help us to better comprehend the nature of decision making. They all (individually and collectively) imply that human behaviours are diverse. While the presence and consequences of similarities in the development of human behaviours are important, so too is their diversity. The nature, extent and the implications of this diversity have been given inadequate attention in the literature.