What can reason (or more broadly, thinking) do for us and what can't it do? This is the question examined by the author, who received the 1978 Nobel Prize in Economic Sciences "for his pioneering work on decision-making processes in economic organizations."

In a complex and uncertain world, humans and animals make decisions under the constraints of limited knowledge, resources, and time. Yet models of rational decision making in economics, cognitive science, biology, and other fields largely ignore these real constraints and instead assume agents with perfect information and unlimited time. About forty years ago, Herbert Simon challenged this view with his notion of "bounded rationality." Today, bounded rationality has become a fashionable term used for disparate views of reasoning. This book promotes bounded rationality 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, it attempts to impose more order and coherence on the idea of bounded rationality. The contributors view bounded rationality neither as optimization under constraints nor as the study of people's reasoning fallacies. The strategies in the adaptive toolbox dispense with optimization and, for the most part, with calculations of probabilities and utilities. The book extends the concept of bounded rationality from cognitive tools to emotions; it analyzes social norms, imitation, and other cultural tools as rational strategies; and it shows how smart heuristics can exploit the structure of environments.

This is a survey of bounded rationality, an area of theoretical macroeconomics which is receiving increased attention. The book is written by a leading macroeconomist who outlines the issues involved, describes some of the analytic tools that are being used, and shows how they can be applied in a range of models. It points to further potential positive developments of the theory as well as some of its limitations.

The Nobel Prize in Economics was awarded to Herbert Simon in 1978. At Carnegie-Mellon University he holds the title of Professor of Computer Science and Psychology. These two facts together delineate the range and uniqueness of his contributions in creating meaningful interactions among fields that developed in isolation but that are all concerned with human decision-making and problem-solving processes.In particular, Simon has brought the insights of decision theory, organization theory (especially as it applies to the business firm), behavior modeling, cognitive psychology, and the study of artificial intelligence to bear on economic questions. This has led not only to new conceptual dimensions for theoretical constructions, but also to a new humanizing realism in economics, a way of taking into account and dealing with human behavior and interactions that lie at the root of all economic activity.The sixty papers and essays contained in these two volumes are grouped under eight sections, each with a brief introductory essay. These are: Some Questions of Public Policy, Dynamic Programming Under Uncertainty; Technological Change; The Structure of Economic Systems; The Business Firm as an Organization; The Economics of Information Processing; Economics and Psychology; and Substantive and Procedural Reality.Most of Simon's papers on classical and neoclassical economic theory are contained in volume one. The second volume collects his papers on behavioral theory, with some overlap between the two volumes.The second edition of Simon's widely read and referenced The Sciences of the Artificial was published by The MIT Press 1981 and is available in both hardcover and paperback.