Towards a Humanistic Model of Decision-Making in an Organizational Context

Abstract

This paper attempts to take steps towards the formulation of a more human approach to the theory of the firm from the starting point of the conventional economics-based models. Bounded rationality and self-interest are shown to be crucial assumptions of conventional economic theory, together with competitive markets and X-efficiency. Then, I put forward the essential assumptions of such an approach. Finally, I will show the implications for management decision-making of such assumptions, emphasizing that at least three criteria have to be considered in any non-trivial decision in an organizational context.

Keywords: Theory of the firm, bounded rationality, self-interest, distinctive competence, mission, identification