Reference #364: Thinking in Systems

Bounded rationality is the human decision-making process whereby we make reasonable decisions based on the limited information we have. This contrast with Adam Smith's view of humans as "homo economicus" who act completely rationally and with perfect information.

Under bounded rationality, we do our best to further our own interests rationally, but lack complete information — of the world, and of the actions of others — and often don't foresee the future impact of our actions on the whole system. We stick with the choice we can live with and really change our behaviour unless forced to.

Meadows. Thinking in Systems, 2008. (106-107)

← PreviousNext →