Prices and knowledge: A market-process perspective

Notes 129which permit them to be understood by others’. This, however, does notappear in Simon’s writings.8 The ‘boundedness’ refers, then, to objective rationality, meaning by this theperfectly informed decisions that would be made by the theoretical fiction ofan omniscient agent.9 On his idea of complexity, see also Simon (1962b). There is some similaritybetween Simon’s and Hayek’s (1964) notions of complexity. On complexity,see Grunberg (1978:546–9).10 Also see Simon (1976:430–1). Simon is fond of this example because, forhim, chess is ‘a microcosm that mirrors interesting properties of decisionmakingsituations in the real world’ (1972:412).11 This saturation could, presumably, occur at different stages such as that ofreception, of storage, or of the processing of information.12 ‘In a world where information is relatively scarce, and where problems fordecision are few and simple, information is almost always a positive good. Ina world where attention is a major scarce resource, information may be anexpensive luxury, for it may turn our attention from what is important to whatis unimportant. We cannot afford to attend to information simply because it isthere’ (Simon 1978b:456).13 Simon (1970:167) defines an ‘information-rich’ world as one in which (1)the average search time required to discover a new opportunity is low, or(2) there are many highly valued opportunities. This idea involves a quiteparticular view of perception. For example, an entrepreneur could,apparently, become aware of too many opportunities, rather than find itdifficult to discover any at all. This view of perception will be consideredbelow.14 Baumol (1979:75–6) realizes that this is not what Simon is saying. On theattempt to make apparently non-optimizing behaviour compatible withmaximization, see Winter (1971:242–3); Boland (1981: 1033); Langlois(1986:226).15 This is not so obviously true. It could be argued that the widespread use ofcomputers has made the world more complex.16 However, this behaviour may approach objective rationality in someexceptional circumstances ‘if the number of very important variables is smallat any given time, and if this list of important variables does not change fromtime to time without the change being noticed’ (Simon 1984:48; emphasis inoriginal).17 The neoclassical agent would ‘allocate just as much effort to scanning thehorizon for newly important variables as is justified by the marginal value (interms of improved decision making) of the scanning. This…alternative isvacuous, providing us with no clue as to how these marginal costs andbenefits are to be estimated’ (Simon 1957: 48).18 See, for example, Simon (1957:204–5) and Simon (1978a:455).19 ‘We need far more empirical knowledge than we now possess as to thebases on which aspirations are formed and the conditions under which theyare modified’ (Simon 1958:399). There is some similarity between this ideaand Mises’s (1949:13–14) notion of ‘felt uneasiness’ as a prompter ofhuman action. The differences between them seem to be due to the different