FROM SUBSTANTIVE TO PROCEDURAL RATIONALITY

Herbert A. Simon
(abstract)

While psychology and economics have both been concerned with rational
human behavior, the term "rational11 has meant quite different things in these
two fields.

Economics has been concerned with substantive rationality: with

the appropriateness of behavior to the achievement of given goals within the

limits imposed by given conditions and constraints.

Psychology has been con-

cerned with procedural rationality: with the processes that human beings use
in order to discover and choose behaviors that will be effective for reaching
their goals.
Because of this fundamental difference there has been little contribution from theories of rationality in economics to psychology and vice versa.
Within the past twenty-five years, however, economics has exhibited an increasing interest in procedural rationality.
First, there has been increased contact of economists with the real world
of business, and a consequent increased awareness of the ways in which decisions
actually are made.

Second, many economists have played a role in the develop-

ment and application of operations research techniques.

The research issues

associated with these techniques are largely issues of computational efficiency,

which is procedural rationality by another name.
Third, conceptual difficulties of defining rationality substantively in
the context of oligopolistic markets, has forced attention to decision-making
procedures.

Similarly, the phenomena of uncertainty have led economic theorists

to postulate rational procedures for forming expectations.

Empirical laboratory

Abstract - Herbert A. Simon

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research on human response to gambles indicates that priori models of proced

ural rationality bear little resemblance to actual human behavior in the face
of uncertainty.
Psychological research in cognitive processes and computer science re
search in artificial intelligence have made great strides in understanding the
processes of rational thought and decision.

It appears likelyand is certainly

essential for the progress of economicsthat the next generation will see econ
omists and psychologists sharing a common interest in the phenomena of procedur
al rationality.