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A discussion of bounded rationality must include a review of two definitions: What is meant by the term bounded, and what is meant by the term rationality? Limited, circumscribed, finite, and restricted are defining words that suggest parameters of a bounded state or condition. The term rational denotes a quality or state of reasonableness, or a sensible, logical, or well-founded condition. The origins of the concept of bounded rationality are historically rooted in commonsense approaches to the art and practice of decision making. The concept has practical relevance to a variety of disciplines: crisis management, crisis negotiation, crisis communication, crisis planning, mediation services, industrial planning, governmental policy making, economics, and individual decision making, to name a few.

Human Limitations for Rationality

The scientific community in the 18th and 19th centuries recognized human limitations that had long been understood but inadequately defined. They recognized that human intelligence had finite capacities or limitations; that the then-current state-of-the-art construction, engineering, and instrumentation technologies were often woefully inadequate to the tasks of producing accurate measurements intended to shed light on phenomena in nature and the constructed world; and that the prevailing theories and observations related to the emerging medical sciences were based on incomplete intelligence or a lack of vital information to make reasonable, if not optimal, diagnoses or decisions.

As late as the Renaissance, European physicians relied on human anatomical information that dated back to the time of Galen, the pioneering Arabic physician of the 2nd century c.e. Galen's anatomical descriptions filled a large gap in medical knowledge, but even Galen's contributions fell short of fully accurate identification of the human skeleton. Anton van Leeuwenhoek, a Dutch lens maker who lived from 1632 to 1723, developed lenses that produced a dramatic 200 percent magnification of what he identified as “animalcules” or single-cell life-forms. The improved lenses led to development of the scientific microscope, which enhanced scientific theorizing and the discovery of bacteria, but it would still take another two centuries for the scientific community to produce lens instrumentation powerful enough to view living viruses. Diagnosis and treatment decisions related to viruses required information that could not exist until visual confirmation of viral life-forms could be confirmed. Medical science remained in a bounded or circumscribed state.

The term rationality derived from the Latin and adopted French word ratio, defined as a lack of information or intelligence, or more specifically, indicating a finite or incomplete intelligence. In the 20th century, Herbert A. Simon refined this informal concept, pointing out that for rational decision making to occur, cognitive limitations, the extent to which individuals are bounded by lack of adequate information, lack of intellectual capacity, and available technical and computational capacity needed to be taken into account in order to make reasonable decisions. Simon argued that a rational action implied behaving in a manner appropriate to a particular situation—to the specific context in which a decision is made. Emotional factors such as fear must be considered as influences that bind or restrict the development of an optimal decision. Physiological and psychological limitations associated with fear, stress, and the fight or flight syndrome, as described in the general adaptation syndrome developed by Hans Selye, constitute factors that may contribute to less than rational or reasonable decision making. The psychological effects of very high levels of stress are well established. The human capacity for sustained attention or the ability to concentrate is diminished, and how an individual perceives what is required for optimal decision making can become altered by real or even imagined crisis situations. What will satisfy immediate or near-term safety or survival may reduce thinking processes to acting upon and accepting a very limited range of what Simon called “satisficing” or satisfactory decisions.

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