Bounded Rationality

What is Rationality?

Rationality is behind the decisions people make according to that particular persons desire and/or belief. As different people have different beliefs and desires, rationality will then differ from person-to-person, causing people to arrive at rationality from different points of view.

It's also why a person has his/her beliefs which has a correlation to their rationality in accordance to that said belief.  Rationality in that persons mind then, is a reasoned logical decision, that the person has felt was the optimal choice out of the choices on offer.

What is Bounded Rationality?

Bounded rationality is rationality, however, it is taking into account the limitations one may have with usual decisions, basically is subject to the information we have at present, and this will affect how we perceive rationality.

Bounded rationality is not only subject to the information present, but also to the limitations of our minds and the finite time that we can spend making the decision.

Bounded rationality was proposed by American political scientist, economist, sociologist, and psychologist; Herbert A. Simon. He viewed bounded rationality as something that complements rationality as optimisation, and something that is a completely logical process at arriving at a decision with the options that are known to a person.

You can also view bounded rationality as making a decision after simplifying the options that are on offer. This is because of the factors that make-up bounded rationality. We as people are not able to make the most optimal decisions sometimes. So taking this into consideration, instead of settling for the optimal solution, we settle for one that sounds rational for us, causing bounded rationality to be seen at work.

Herbert A. Simon saw that most human beings are only partly-rational. He saw that people are able to make rational thought-out decisions. However, he also saw the irrational and emotional side to them that are still present, and whilst a person can make a good decision, that irrational and emotional side to them is a part of them - therefore making the person only partly-rational. 

Ariel Rubinstein saw that decision-makers can have trouble with making decisions about 'when' and 'how' to make a decision. He made the decision himself to put in place an actual procedure to follow when making a decision, helping the person to become more decisive.