Bounded Rationality Quotes

The most basic inherent constraint is that neither time nor wisdom are free goods available in unlimited quantity. This means that in social processes, as in economic processes, it is not only impossible to attain perfection but irrational to seek perfection- or even to seek the best possible result in each separate instance.

Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity - or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories.

When it comes to the mental world, when we design things like health care and retirement and stock markets, we somehow forget the idea that we are limited. I think that if we understood our cognitive limitations in the same way that we understand our physical limitations … we could design a better world.

If you start from a belief that the most knowledgeable person on earth does not have even one percent of the total knowledge on earth, that shoots down social engineering, economic central planning, judicial activism, and innumerable other ambitious notions favored by the political left.

We don't see very far in the future, we are very focused on one idea at a time, one problem at a time, and all these are incompatible with rationality as economic theory assumes it.

Whereas economic man maximises, selects the best alternative from among all those available to him, his cousin, administrative man, satisfices, looks for a course of action that is satisfactory or 'good enough'.

We accept that people are irrational for good Darwinian reasons. But I don't think we should be so pessimistic as to think that therefore we're forever condemned to be irrational.

It seems to me that at least as far as the financial markets are concerned, there is increasing evidence against rational expectations, even at the macro level.

Most people, even in simple risky situations, don't behave the way the theory of utility would have them behave.

This is the constitutional limitation of man's knowledge and interests, the fact that he cannot know more than a tiny part of the whole of society and that therefore all that can enter into his motives are the immediate effects which his actions will have in the sphere he knows.