Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 115: On the Behavioral and Rational Foundation of Economic Theory

Herbert Simon
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Herbert Simon: Carnegie-Mellon University

Abstract: Existing uncertainties about the correct explanations for economic growth and business cycles cannot be settled by aggregative analysis within the neoclassical framework. Current disputes in theory rest largely on ad hoc, casually empirical, assumptions about departures from perfect rationality under uncertainty. Such disputes can only be settled by painstaking microeconomic empirical study of human decision making and problem solving. Microeconomic research of the kinds that are required can receive powerful guidance from the theories of human thinking that have been developed and tested over the past twenty five years by cognitive psychologists.

Keywords: Economic theory; Economic human behavior; Microeconomic research

JEL-codes: C81; D10

35 pages, December 1983

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