Herbert A. Simon and Organizational Economics

Abstract

This article evaluates Herbert A. Simon's contribution to organization theory, placing special emphasis on the criterion of bounded rationality. Simon's criticism of the orthodox version of organizational bureaucracy is interpreted and his analysis is extended to institutional economics. One of Simon's main achievements in organizational theory consisted of analytically evaluating the psychology of individual and collective behaviour, thereby opening up the way for future investigation by D. Kahneman and T. Schelling.

Keywords: Herbert A. Simon, organization, limited rationality, decision theory, institutional economics

JEL Classification: A11, B52, D23, D79