Prices and knowledge: A market-process perspective
Prices and knowledge: A market-process perspective
Prices and knowledge: A market-process perspective
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
‘Bounded rationality’ <strong>and</strong> the price system 67goal’. A more detailed analysis becomes necessary ‘as the complexityof the environment increases, or its speed of change’ (Simon1959:313). The traditional approach seems acceptable to Simon insimple, unchanging situations ‘where it might be assumed thatadditional computational time or power could not change theoutcome’ (1978b:457; emphasis added). For him,classical economics was highly successful in h<strong>and</strong>ling small-mazeproblems without depending on psychology. Labor relations,imperfect competition, uncertainty, <strong>and</strong> long-run dynamics encasethe decision maker in a much larger maze than those considered inclassical short-run static theory.(Simon 1963:343)The same emphasis appears in his criticism of search theory as aremedy for the deficiencies of neoclassical man:…the new theories do nothing to alleviate the computationalcomplexities facing the decision maker…but simply magnify <strong>and</strong>multiply them. Now he needs to compute not merely the shapes ofhis supply <strong>and</strong> dem<strong>and</strong> curves, but, in addition, the costs <strong>and</strong>benefits of computing these shapes to greater accuracy as well.(Simon 1979:485)Simon uses the example of chess to illustrate the type of limitationhumans face. It is known that chess has at least one optimal (i.e.winning) strategy. However, to find it, it would be necessary to considera huge set of possible strategies. The number of strategies in this set,although finite, is unmanageably large even for the most powerfulcomputers. Therefore, Simon argues, it has not (yet) been possible tofind the optimal one. And this is also what happens in reality: the largenumber of variables to be taken into account makes it computationallyimpossible for individuals to achieve optimality (Simon 1972:417). 10The ‘information-rich’ worldIn Simon’s view, human beings in a complex world are always indanger of being saturated by the many variables that are there to beknown. 11 Information ‘consumes the attention of its recipients’(Simon 1971:173). Therefore, he describes this as an ‘information-