Unbounded Rationality: Difference Between Optimization And Bayseian Models

My example of the rational choice theory of today is the mexican drug controls of December 2011. The drug trafficking organization in Mexico was highly rational, self-interested actors seeked to maximize profit.

Rationalism is an explanation of the world through our minds. Rationalism is a theory of knowledge where the critical

opinionated to everything that comes to mind and sight In the book, "Adventures in the

Economists have often modelled human decision makers as completely rational. According to this model, rational people know their own preferences, gather and accurately process all relevant information, and then make rational choices that advance their own interests. However, Herbert Simon won a Nobel Prize in economics by pointing out that people are rational, but only boundedly so in that they seldom gather all available information, they often do not accurately process the information

At some point in history, it is highly probable that a wise man or woman once made the assertion that irrational decisions lead to irrational outcomes and in that statement, it would set in place a pivotal exemplary for decision making in today’s society. However, Leon Kass, an American physician, scientist, and educator, takes the stance combating the ideology of rational decision making in his article, entitled, “The Wisdom of Repugnance. by upholding his argument that Repugnance holds validity when making effective decisions of policy and lawmaking. In dissent, Although Kass makes the argument that Repugnance is an applicable model to construct social mores and laws I strongly believe that argumentation (which is not present in the idea

Kant vs. Betham, principles of utility and philosophy the rational and irrational. The understanding of the fundamental of nature, knowledge with the existence of reality and predominant or dominate that deals with principles of utility. The criteria of rational knowledge of principles – is the way of clarifying and prioritizing what is explained and interpreted through our actions, motive and consequence. This is a mixture of both reason and unreason; in addition, too reason and passions. Compared to a non-rational or irrational aspect of the human approach or temperament. Thus, this is a way of thinking and rationalizing what we establish around us. Principles of utility is a way of thinking what we obtain around ourselves as human beings.

In J.J.C. Smarts theory of Extreme and Restricted Utilitarianism he argues that Restricted Utilitarianism, the idea that adoption of rules that maximize happiness and never breaking the rules is best for maximum utility, is irrational. He argues that Extreme Utilitarianism, the idea that indeed rules are good but in some cases where action is required it is better to bend or even break the rules to maximize utility. I intend to argue this theory is incorrect.

The concept of ‘rationality’ has been talked through the centuries. According to Grey (2013), rationality is a big question because of this proposition which has the meaning and difficulties seem to be defining of a whole set of issues which have resonated through both organisation theory and practice ever since. And rationality is the basis of a decision, rational decision makers are objective and logical, they reach the goal that maximises the value. Not only rationality is important to organisations, and also it can be identified in various kinds of management theories. This essay will introduce the different aspects of the concept of ‘rationality’ and make explanations that how these are recognised in different management theories.

Owing to limited rationality of man, Herbert Simon contends that most decisions are based on limited rationality, that is, the organization is working like a brain. It would be impossible for organizations to attain perfection since their members have limited information-processing abilities (Morgan, G, 1997)

This model would work if we were in a perfect world. We are limited by our own humanistic limitations and therefore we are not capable of providing true rationality in making our decisions.

However, this idea can be a divergence from reality, as in real life it is difficult or even impossible to find such agents that will make perfectly rational decision as reflected by irrational human behaviour. Though the assumption of individuals act rationally is important when analysing economics and interactions. This is because if we don’t assume everyone act rationally, if there’s a loss of welfare, we will not be able to decide whether it is the result of flaw in the structure or just because of irrationality.

Inadequate information, data, and knowledge. For rational decision-making to be accurate, reliable, and complete, information about various aspects of the problem under investigation is necessary. Possible future trends can be estimated with the help of such information. This facilitates rational decision-making. However, adequate and reliable information may not be available at the time of decision-making. As a result, the decisions may become defective or irrational or may prove faulty in the course of time. This is how decisions become irrational.

The difficulties that were accompanied with this approach led to deviation from the rational model. Complexity of modern organizations and the limited cognitive ability of decision makers were most influencing factors in the deviation . The decision makers were unable to operate under perfect rationality conditions. The information about a decision was mostly unavailable or unclear, and open to different interpretations. Also, the criteria of evaluating alternative solutions were not agreed upon. It also required very long time and a lot of energy of the decision makers to pursue a maximizing outcome. These constrains led to a conclusion that the absolute rational model is unreachable.

* Bounded rationality: He could perceive that recalling the product is the only plan of action. He didn’t explore other options.

Parker’s budgeting decision is a good example of an individual acting with bounded rationality. This term was introduced by Simon in 1957 (as cited in Tolbert & Hall, 2008) to argue that normative models of decision making, which assume fully rational and objective judgement (Teale, Dispenza, Flynn & Currie, 2003), are unrealistic because human rationality is limited. Parker’s judgement may have seemed rational to him, but it was not rational for the organisation, a subtle distinction about rationality made by Storing (as cited in Tolbert & Hall, 2008). Parker’s judgement was also not rational in that he did not have all available knowledge and awareness of risk, which are the conditions of normative models (Teale et al, 2003) and the “official theory” of management (Anthony, as cited in Teale et al, 2003, p. 14). For example, Parker did not know about the variations in the terrain when he made his decision, and he also assumed that the assistant workers could work at the same physical rate that he could. Both of these limitations were factors resulting in a risk to on-time task completion.