Bounded Rationality — How We Make “Good Enough” Decisions

Have you ever found yourself standing in the cereal aisle, overwhelmed by dozens of choices, and simply grabbing whatever box looks good enough? Or perhaps you've been searching for a new job and, instead of exhaustively researching every potential opportunity out there, you pick the first one that reasonably aligns with your needs. If you recognize yourself in these scenarios, you’re already practicing bounded rationality—making decisions that aren’t perfect, but are practical and efficient. Bounded rationality was introduced by Nobel Prize-winning economist Herbert Simon in the 1950s. He noticed that classical economics viewed humans as perfectly rational beings, capable of flawlessly weighing all possible options before making optimal choices. But Simon argued that this simply wasn't realistic. Human beings, he proposed, face significant limitations—limited time, limited information, and limited cognitive resources—that force us to simplify our decision-making process.