Behaviour and Evidence

Here follow, only lightly edited, the first ten pages of the old Chapter 7: ‘Behaviour and Evidence’. The remaining pages, concerned with empirical evidence, have been deleted in favour of the discussion of that topic now found in the new Chapter 5 — ‘Managerial Theories of the Firm’, above. By ‘behaviourism’ in economics I refer explicitly to the body of ideas founded by Herbert Simon, which are now perhaps more widely termed ‘bounded rationality’. By ‘satisficing’ I referred to a particular class of models that Herbert Simon suggested in the second half of the 1950s, 1where, rather than attempting to find an optimum or maximizing solution to a complex problem, the subject undertakes an heuristic search effort only until she or he has found a solution that is ‘good enough’. The original text, written around 1961, follows. Although I stand by the critique I wrote then, and although I think I was one of the earliest economists to recognize publicly the richness of Simon’s ideas, I believe now that I also still failed to appreciate the full power of bounded rationality over the whole of economics. The 1978 Nobel electors were more perceptive.