Fallibility in Human Organizations and Political Systems
Jounal of Economic Perspectives, Vol. 5, No. 2, 1991
Yale University Economic Growth Center Discussion Paper No. 625
32 Pages Posted: 11 Nov 2012
Date Written: February 1991
This paper presents a perspective on some of the organizational and economic consequences of the fallibility in human judgments and decisions. The effects of fallibility are explored in several different contexts. For instance, the paper shows that the diversification of political authority in the hands of many individuals has some desirable consequences, previously not adequately identified, vis a vis its concentration in the hands of a few. It examines the consequences of fallibility in choosing the successors to the current set of managers in organizations, and how these consequences might differ between centralized and decentralized organizations. It illustrates some trade-offs that arise from individuals’ fallibility in the choice of projects and ideas within settings such as committees, hierarchies and polyarchies, focusing on how they may accept or reject innovation-oriented projects, such as R&D investments, and ideas for new products and technologies. Both the fallibility of an individual and that of an organization are viewed largely as reflections of the scarcity of such resources such as time (including the importance of the timeliness of decisions), effort, the number and types of employees (which translate into personnel costs), and the intrinsic abilities of heterogeneous individuals for decision making and communication. A part of the paper describes some aspects of the approach underlying the analyses of human fallibility. This description highlights: the premises concerning and individual decision maker, the potential association between the motivation of an organization’s employees and their fallibility, and the nature and the aims of the analysis of organizations.
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