Simon's Bounded Rationality Said Comparative Study With The The Kahneman Behavior Of Economic Thought

The Nobel Prize in Economics is recognized as the highest award in economics all over the word. In 1978, The Nobel Prize in Economics awarded to Carnegie-Mellon University Professor Herbert ? A. Simon in the United States, in recognition of his contribution to the two prominent theories: the bounded rationality and decision-making theory. And his decision-making theory is based on the bounded rationality. 24 years later, in 2002 The Nobel Prize in economics awarded to Princeton University professor Daniel Kahneman, in recognition of his success to combine psychology analysis and economics study and laid the foundation for the field of the creation of a new Economics. This new area is behavioral economics which is now relatively front and popular.Herbert ? A. Simon criticize and revise the assumptions of a comprehensive rationality. In the classical economic theory, the "economic man" is conceived as a fully rational and can reach to maximize their own interests by the optimal choice. However, the practice proved there are the significant deviations, this assumption is not realistic and rationality is limited. He believed that people's incomplete knowledge, incomplete information, behavior,cognitive and psychological constraints, the expected interference, the uncertainty of the future, as well as the complexity of the environment, lead to people's rationality is limited, rather than omniscient rationality; which should be a rational process, rather than substantive rationality; the mechanism of human choice should be the adaptive mechanism of limited rationality, rather than optimal mechanism of fully rational. Because of the limited boundaries of rationality, it is impossible to achieve the absolute optimal solution, and only replace it with satisfactory solution. Thus, Simon proposed "the bounded rationality" and give rise to the "principle of satisfaction".Kahneman have been also modifying the assumption of "economic man" on the basis of Simon's "Bounded Rationality". In order to overcome the defects of economic rationality, he formally introduces inner view of psychology and research methods to economics. On the basis of his cognitive psychology, he makes in-depth research on behavior of the human decision under the uncertain circumstances. First of all, he demonstrated that when making decision, the people will take some convenient thinking. These shortcuts sometimes help people quickly to make accurate judgments, but also often lead to various heuristic bias. Secondly, he systematically described "Prospect Theory." It resolve the problem that the past "expected utility theory" can not explain that obvious behavior of risk preferring,and perfect the human decision-making theory under uncertain circumstances. Finally, he studied the effect of framework and its application on the rational people model. Thus, he constructed a complete set theory logic system of modern behavioral economics which is inherent unified and more closer the reality.We can see that Daniel. Kahneman's theory is full of talking about the deviation of people's cognition and behavior, it is directly seen a variety of people's "Bounded Rationality." So to speak, Kahneman greatly developed the "Bounded Rationality", shaken the assumptions of neo-classical economics, and affect the development of modern economics.By comprehensive and in-depth presenting and commenting the theory of Simon and Kahneman, it is not only has been comprehensive and in-depth understanding on their theoretical content,but also have a full understanding on their theoretical significance, practical significance and shortcomings. In particular, we can better understand the other concepts of Simon's "Bounded Rationality" which is easy to ignore, and straight out the origin of "Bounded Rationality" theory and development stage of behavioral economics and so on.By comparing with Simon's Bounded Rationality and Kahneman's the economic thought of behavior, we can found that there are many similar views on some issues between them, such as amendments to the traditional theory, the unrealistic nature of "economic man" rational, intuitive reason and principle of satisfaction, the rational process and psychological deviation, the impact of cognitive and decision-making from the environment, culture, institutions, motivation, preferences, knowledge and experience, etc. We also can be found that there are a closely relationship between the theory of Kahneman and Simon, many theoretical viewpoints of Kahneman have been inspired from Simon, Simon's bounded rationality has prompted the development of behavioral economics. At the same time, It have also corrected an incorrect views: Behavioral economics is "amend" the neo-classical economics and not "reform" as some people think so.