An Empirically-Based Microeconomics
Abstract
In his Mattioli Lectures, Nobel Laureate Professor Herbert A. Simon directs attention to the kinds of empirical research that are necessary for progress in microeconomics. He traces the development of neoclassical economic theory and its gradual retreat from empiricism to abstraction. He then discusses the importance of business firms to the economic system, and the need for a thoroughly empirical understanding of how organisations work and reach their decisions. Finally, he examines innovative approaches to empirical research, including experimental economics, observational methods for studying economic behaviour, and the kinds of simulation models that are needed to interpret decision process. A round-table discussion of these issues follows; the participants, in addition to Professor Simon, are Professors Claudio Dematte, Massimo Egidi, Richard M. Goodwin, Robert Marris, Aldo Montesano and Riccardo Viale.
... Rationality involves the capability to make a reasonable decision to realize goals, such as pursuing interests and utility (Simon, 1997). Specifically, Simon (1997) proposed that the key to rationality is to seek out the means to achieve an aim, highlighting that rationality is the capacity for identifying and associating goals and means. ...
... Rationality involves the capability to make a reasonable decision to realize goals, such as pursuing interests and utility (Simon, 1997). Specifically, Simon (1997) proposed that the key to rationality is to seek out the means to achieve an aim, highlighting that rationality is the capacity for identifying and associating goals and means. Individual rationality is relevant to performing maximizing or satisficing decisionmaking to benefit oneself (Simon, 1956(Simon, , 1997. ...
... Specifically, Simon (1997) proposed that the key to rationality is to seek out the means to achieve an aim, highlighting that rationality is the capacity for identifying and associating goals and means. Individual rationality is relevant to performing maximizing or satisficing decisionmaking to benefit oneself (Simon, 1956(Simon, , 1997. By contrast, social rationality plays a crucial role in protecting collective interests and coping with an emergency in society (Simon, 1990). ...
Prior measures on rationality overlook the individual differences in the weight people place on social rationality versus individual rationality. The current research develops and validates an individual-collective dilemma task (ICDT) to distinguish different rationality types. It was translated from a reality that, at the beginning of the ongoing COVID-19 outbreak, a global shortage of face masks occurred because of the jumping demand for masks as a precautionary measure. The ICDT asked participants to decide how many masks to buy in front of a shortfall of masks, which facilitated coping with a hypothetical epidemic outbreak. Based on the number of masks they selected, three rationality groups emerged. Individual rationalists preferred self-interest goals to goals of social interests; social rationalists prioritized social-interest goals; balancers assigned equal weight to both goals. The ICDT showed sound test–retest reliability and criterion-related, discriminant, and convergent validity. The present research contributes to the literature on rationality assessment and offers policy-makers a valid and reliable tool to understand the distribution of rationalists among the public.
... The discussion which follows entails their abandonment together with 'demand curves' and 'supply curves '. This is a 'vast program' as De Gaulle once said in another context, but getting rid of them is a major step toward making economics more similar to all empirically based 'sciences'-as Herb Simon (1997) advocated-and more distant from theology. ...
... Next, we ought to study which properties emerge out of the interactions themselves. In that we should finally meet H. Simon (1997) plea for an empirically grounded economic discipline. ...
Even the most rudimentary training from Economics 101 starts with demand curves going down and supply curves going up. They are so ‘natural’ that they sound even more obvious than the Euclidian postulates in mathematics. But are they? What do they actually mean? Start with “demand curves”. Are they hypothetical ‘psychological constructs’ on individual preferences? Propositions on aggregation over them? Reduced forms of actual dynamic proposition of time profiles of prices and demanded quantities? Similar considerations apply to “supply curves” The point here, drawing upon the chapter by Kirman and Dosi, in Dosi (Dosi, Foundations of Complex Evolving Economies Innovation, Organization and Industrial Dynamics, Oxford University Press, 2023), is that the forest of demand and supply curves is basically there to populate the analysis with double axiomatic notions of equilibria , both ‘in the head’ of individual agents, and in environments in which they operate. Supply and demand “curves”, I am arguing, are one of the three major methodological stumbling blocks on the way of progress in economics, the other related ones being ‘utility functions’ and ‘production functions’. There is an alternative: represent markets and industries how they actually works , and model them both via fully fledged Agent Based Models and via lower dimensional dynamical systems.
... However, with the proliferation of open innovation, this line is becoming increasingly blurred (Chesbrough, 2006). Third, knowledge is held by individuals and the social context within an organization (Simon, 1997). In the knowledge economy, human capital is crucial because employees are no longer merely an element of the production system, but rather owners, creators, and controllers of knowledge (Kogut & Zander, 1996). ...
... Grant and Baden-Fuller (1995) stated that knowledge is acquired by individuals and, in the case of tacit knowledge, is also stored by individuals. In addition, knowledge is expressed and made explicit when members work together in a social setting, i.e., a team, group, organization, or network (Simon, 1997). Organizations should therefore be understood or viewed as a social community that specializes in the creation and transfer of knowledge (Kogut & Zander, 1996;Nonaka, 1994). ...
Based on the knowledge-based view (KBV), knowledge is the most significant strategic resource of an organization. From a strategic management standpoint, connecting knowledge and performance is one of the most vital undertakings of any knowledge-based theory of an organization. However, most existing studies in this field left many questions unanswered. Although many researchers have recognized the importance of knowledge production in generating an organization’s competitive advantage, they have failed to establish a solid causality between organizational behaviors in knowledge creation and firm performance, and hence the mechanisms remain unclear. This study argues that the innovation process is characterized by the generation of new knowledge, where creative problem solving and new product development can occur and yield innovation results. Idea management and intellectual property, innovation process, and innovation portfolio and project management represent broad innovation processes. Thus, this study proposes a new conceptual framework to investigate the link between broad innovation processes and Small and Medium Enterprise (SME) performance. This novel perspective sheds light on how new knowledge generation, i.e., innovation, in the innovation process directly impacts SME performance, thereby connecting knowledge and firm performance via innovation processes.
... One way to capture this is by using a utility function approach, borrowed from behavioral economics [50,51]. This is also related to 'satisficing' [52,53,54], defined as the process by which animals do not seek to maximize food intake, but instead seek to maintain food intake above a threshold. If food is plentiful, then the marginal utility of increasing intake is small; in this case, an animal will likely be more concerned with, for example, avoiding threats than leaving a current patch in search of higher returns. ...
... Temporal discounting, (also called 'delay discounting'), refers to when the animal values current rewards more than expected future rewards [58,59,60]. Satisficing refers to when animals do not seek to maximize food intake, but instead to maintain food intake above a threshold [52,53,54]. Various models of cognitive biases have incorporated these mechanisms to explain cases where the forager stays in a patch longer than optimal. ...
The patch-leaving problem is a canonical foraging task, in which a forager must decide to leave a current resource in search for another. Theoretical work has derived optimal strategies for when to leave a patch, and experiments have tested for conditions where animals do or do not follow an optimal strategy. Nevertheless, models of patch-leaving decisions do not consider the imperfect and noisy sampling process through which an animal gathers information, and how this process is constrained by neurobiological mechanisms. In this theoretical study, we formulate an evidence accumulation model of patch-leaving decisions where the animal averages over noisy measurements to estimate the state of the current patch and the overall environment. We solve the model for conditions where foraging decisions are optimal and equivalent to the marginal value theorem, and perform simulations to analyze deviations from optimal when these conditions are not met. By adjusting the drift rate and decision threshold, the model can represent different “strategies”, for example an incremental, decremental, or counting strategy. These strategies yield identical decisions in the limiting case but differ in how patch residence times adapt when the foraging environment is uncertain. To describe sub-optimal decisions, we introduce an energy-dependent marginal utility function that predicts longer than optimal patch residence times when food is plentiful. Our model provides a quantitative connection between ecological models of foraging behavior and evidence accumulation models of decision making. Moreover, it provides a theoretical framework for potential experiments which seek to identify neural circuits underlying patch-leaving decisions.
... The traditional economic concept of the rationally acting individual turns out to be incorrect. Decision-making can best be explained with the theory of bounded rationality (Simon, 1997). According to this, people tend to make decisions with particular biases. ...
The chapter "Towards a More Sustainable Approach to Personal Data" highlights the growing tension between data-driven business models and user privacy. It argues that preventing data processing is no longer realistic, so businesses must focus on responsible, transparent data use to rebuild trust. The author introduces the iceberg model to illustrate visible trust signals and hidden psychological constructs that influence how trust is formed online. Despite rising concerns, many users are still willing to share personal data if they perceive clear value in return. The chapter calls for a shift from exploitative practices to trust-based relationships, positioning digital trust as a key strategic asset.
... By creating a behavioural model that does not depend on the dominant concept of rationality, it is possible to better explain the fluctuations in economic activity, which are endemic to market economies. As a result, the behavioural approach allows for a better understanding of fluctuations in, among others, national output and inflation (Simon, 1997). Moreover, it turns out that in the behavioural model the central bank has a much greater role and influence in stabilising the economy. ...
Through its interdisciplinary approach, this book combines traditional economic
theories with modern analytical methods, offering the tools and perspectives
necessary to understand and shape contemporary macroeconomic policies.
It describes an innovative iterative stability assessment model that uses techniques such as cluster analysis and Bayesian inference, enabling more precise and dynamic formulation of economic policies. This book discusses in detail how machine learning tools can identify non-obvious
patterns in macroeconomic data and predict long-term stability, considering
changing global conditions, such as the COVID-19 pandemic or new geopolitical
conflicts. By utilizing machine learning tools, the presented methodology allows
for more precise assessments of economic risks and the formulation of appropriate
policies in a changing global environment.
... Simon first conceptualized bounded rationality in 1957, explaining that the principle of bounded rationality is: [t]he capacity of the human mind for formulating and solving complex problems is very small compared with the size of the problems whose solution is required for objectively rational behavior in the real world -or even for a reasonable approximation to such objective rationality. (Simon, 1957, p. 198, see also p. 202) Later Simon (1997b) extrapolated on bounded rationality, insisting that this type of behavioral rationality is consistent with how humans actually make decisions as they search for alternatives using incomplete and inaccurate knowledge of the consequences of those actions, and then choose a satisfactory enough action (Simon, 1997b, p. 17). Simon (1957) elaborated that one way to simplify a choice problem was to replace the goal of maximizing (i.e., seeking the "best" outcome after exhaustively considering all possibilities and their consequences, with complete information) with satisficing, which includes selecting a "good enough" choice. ...
Herbert A. Simon would likely have disputed Aristotle’s famous claim that the law is free from passion, or at least, he would have pointed out that legal decision-making is free from rationality. Simon did not argue that the law, or legal actors, were somehow irrational, but that human rational decision making was a fallacy. Simon (1955) said that the “classical” concepts of rationality assumed that the decision maker can attach pay-offs to each alternative, predict what will happen without any unanticipated outcomes, and select the best outcome with certainty. However, decision makers cannot literally make calculations to come to non-mathematical decisions. Hagle (1990) agreed that the theoretical rational decision maker would have access to and examine all available information and alternatives, selecting the one that produced exacted anticipated outcomes (from the cost-benefit analysis) and would consider all possibilities and consequences associated with each possibility before deciding. According to Hagle (1990), an ideal rational decision maker using such an exhaustive and comprehensive model of rational decision-making faces common barriers: control, unintended results, missing or unavailable data, and goals. Decision makers cannot usually control all elements of the problem at hand; cannot predict unforeseen results that may occur for the people the decision affects; cannot have at her disposal all complete data necessary to make an accurate cost-benefit analysis of possible solutions to the given problem; and the decision maker’s goals may not be known or adequately identified. To cope with the constraints of the rational decision-making model, Simon explored the concept of bounded rationality.
... Furthermore, the concept of bounded rationality [12] is essential, since an individual -far from optimizing resources-, as the neoclassical economics theory says, makes sure their choices are satisfying. The information available to individuals is not complete, neither the capacity to process it, plus emphasis is placed on the importance of plans, not only strategies; and brings to the table the existence of a certain margin of freedom for decision making [13]. ...
The objective of this paper is to analyze the key factors, which influence individual decision making in economics. To this purpose, a computational mobile modeling is used for human behavior, which is treated as a complex system. Decision tables are used for such modeling to determine the similarities of the responses obtained by users for analysis. The results show that emotional aspects are the ones that most influence economic decision-making in people when they fear success. The visceral aspects are detrimental to making economic decisions in the individuals of the work.
... Open-ended problems in self-directed learning rarely meet all conditions for being considered ideal decision situations. Here, the concept of bounded rationality may be more appropriate, as it recognizes that the decision maker must explore all options, has a limited ability to predict the outcomes of each choice, and selects options that are satisfactory within the given constraints (Simon, 1997). ...
... Combining the messages of March and Whitehead above, we should make clear from the beginning that we are claiming neither newness nor that our suggestions are the most important ones. We merely suggest that building on certain building blocks from March's (and Leites') work, one might be able to examine decision making in a more empirically relevant way (in the sense of Simon, 1997), than if viewed through one disciplinary perspective. That may go against the dynamics and forces inherent in both the disciplines themselves and in the scholarly profession (which rewards publishing in disciplinary journals; interacting mostly with people within one's own discipline). ...
This chapter explores geopolitics, garbage cans, the need for interdisciplinary insight, and the lures and limitations of one-sided mono-disciplinary conceptual models in understanding strategic decision making. We argue that a combination of the garbage can model and Nathan Leites’ psycho-cultural approach to decision making might be useful in giving insights for events and for organizational behavior. As a decision making case, we consider the 1941 decision of the Empire of Japan to declare war on the Allied Powers. We find that there could be useful lines of integration between the garbage can framework and other perspectives in geopolitical decision making. In using a historical example to illustrate the possible integration, we argue that there are inherent limits to single-model decision making approaches. Developing interdisciplinary frameworks for understanding foreign policy decision making may lead to better insights in real-world processes and seems like a step in a fruitful direction.
... These critiques call for richer, more realistic assumptions about human actors, or at least some effort towards making value assumptions explicit. Yet, as Simon (1998) and Bromiley & Papenhausen (2003) argue, strategic management researchers often leave their behavioral assumptions impliciteven when these give their theories more predictive power than do their explicit rationality assumptions. In general these writers argue theories based on realistic behavioral assumptions are more likely to predict how people will react to stimuli. ...
Strategizing implies making agentic choices in some middle ground between un-analyzable free will and agency-denying determinism. Paradoxically, neither view can capture the strategist’s situation or process. So how are strategy theorists approach agency? In our opening sections, we review the mainstream literature and find seven main arguments or tracks. Five, by improving methodological accuracy and reducing variance, effectively throttle or deny the strategist’s agency. The two other tracks offer agency an ontological or epistemological place in the analysis but underplay the synthetic nature of the strategist’s practice. In our final sections, we treat strategizing as handling the practice-based constraints to the strategist’s agency. A positivist approach makes little sense here for ex definition strategy supposes a finite option-space into which the strategist’s agency is ‘thrown’. Practitioners focus on their choices within this space rather than on the application of a generalized ‘theory of strategy’. There is little new here; but analyzing it means moving away from causal modeling and towards exploring the options remaining after all reasonable determining causes have been identified - leaving the strategist with the under-determined middle ground s/he ‘synthesizes’ from incommensurable theories and empirically justified heuristics. Concluding, we propose a novel track of theorizing for those strategists seeking to engage their agentic capabilities rather than theorizing about agency as a component of a rigorous academic model.
... Global Rationality vs. Bounded Rationality In global rationality and based on a constant utility function, Simon (Simon 1997) presumes that the decision maker is aware of all available choices along with the corresponding anticipated worth of utility to be able to select the alternative that expands the assumed utility. Contrastingly, bounded rationality, supposes that the decision maker has a limited knowledge of available options and their consequences. ...
This survey paper updates the literature with the various technologies associated with group decision making (GDM) processes including concepts, decision technology support, and evaluation metrics. We are concerned about quantitative and qualitative criteria for GDM results' success measurements. Further, we discuss the factors that contribute to enhance information presentation and user interfaces' usability. We also discuss how the eye tracking method is used to record users' eye movements for users' interfaces effectiveness evaluation. The Analytic Hierarchy Process (AHP) standard method and how it is adapted to GDM are covered. Related GDM voting mechanisms are reviewed. Examples of the key remarks on group decision quality found in the literature include the following. The quality of group decisions has been historically linked to the quality of the information available to decision makers as well as to the number of decision-makers contributing their observations and opinions as research reveals. Domain knowledge expertise is shown to affect group decision quality positively. Besides, users' satisfaction is commonly used in literature to judge on the GDM results.
... Since attention scarcity is misunderstood as information scarcity; designers of information system make the systems more efficient, thereby providing more information that is further irrelevant, unrelated and insignificant [20]. ...
Just as ‘industrial revolution’ ushered in the ‘industrial age’ in the eighteenth century, ‘information and digital revolution’ has steered the emergence of ‘information age’ in the middle of the twentieth century. The onset of the information age has been accompanied with the advent of a knowledge economy, comprising the quaternary and quinary sectors. Information age indicates the enhanced and growing significance of ‘information’ as the single most valuable commodity. Information is a factor of production, commanding a price. However, availability of ‘wealth of information’ at the disposal of consumers has created a peculiar situation of ‘information overload’, leading to ‘poverty of attention’. This has led to the emergence of ‘attention economy’, which treats information as an economic problem, and considers human attention as a scarce commodity. As the quantity of digital information increases, the level of human attention decreases. Information overload or clutter and limited capacity of humans to take this information leads to the psychological phenomenon of ‘selective attention’, ‘selective retention’, and ‘selective distortion’. Hence, the characteristics; and the media or internet habits of the target audience need to be researched, so as to identify their interest areas. Information can be provided or may be hyperlinked accordingly. Website designers are dealing with this tough job of creating attractive websites and storefronts, so that the audience, once visit such a site, spend a longer time there, and find it useful and user-friendly. The search engines should also invest their time and effort to analyse and judge whether a particular information is worthwhile, authentic, and not simply a repetition of what is already there. This will substantially reduce information overload will resolve the attention issue.
... Empirical research has shown that people value advice highly, even when it is from non-experts, and there is a body of experimental work that supports Simon's observation that people are, to a reasonable degree, docile (e.g., Çelen et al., 2010;Schotter, 2003). The susceptibility of individuals to social influence and persuasion thus has positive and complex behavioral connotations that extend beyond the passivity or meekness suggested in the popular dictionary definition of "docility" (Simon, 1993(Simon, , 2009. ...
The business incubation process evolves through coach-incubatee interactions rather than merely institutional intervention. We contribute to a behavioral understanding of this process by exploring the determinants and expression of docility, a fundamental human behavior. Our findings suggest that business coaches’ perceptions of stakeholder value creation needs and their experience of incubatees’ proactive behavior are essential determinants of coaching behavior. These behavioral determinants lead coaches to place idiosyncratic expectations on and become responsive to incubatees, and this is reflected in the range of their interventions in new venture creation. From a behavioral perspective, the outcome of coaches’ interventions is a shared understanding of how to navigate the ambiguous and uncertain aspects of new venturing. Adopting a behavioral approach thus helps us to reframe business incubation—previously regarded to be a structured process—as a flexible process, more accurately capturing its role in facilitating the highly uncertain process of new venture creation.
... The present study has integrated three models of decision sciences in a single coherent investigation. Model of Decision Situations in Organizations by Griffin (2011), Model of Decision Types by Simon (1997) and Typology of Decision Styles by Scott and Bruce (1995) is integrated in this investigation. The underlying research questions are related to the premise that two major decision situations including certainty and uncertainty require programmed and non-programmed decisions and while making these decisions the managers select rational and intuitive decision-making style respectively. ...
The direct and indirect consequences of decision situations in cellular companies were investigated in this research. Prior literature suggests that usually two types of decisions are made in the modern organizations broadly categorized as programmed and non-programmed decisions. Study was conducted which focused on examining the direct effect and indirect effect and (through programmed and non-programmed decisions) on subsequent decision styles of managers which were rational and intuitive. Three scales were used for data collection from managers in cellular companies (N = 400). Hierarchical regressions confirmed that decision situations have both direct and indirect effect on the decision styles of managers. Keywords: Certainty, Uncertainty, Programmed, Non-Programmed Decisions, Rational Style, Intuitive Style.
... the incapability of the human mind to process it even if that were possible. As a reaction to this, the brain operates within the confines of its cognitive limits, or the 'psychological properties' of the individual (Simon, 1997). Albonetti (1986) applied Simon's economic theory to human behaviour as it relates to courtroom decision making. ...
It is generally accepted that men commit more crimes than women. The widespread acceptance of this view is based primarily on the number of convictions with most jurisdictions reporting considerably fewer incarcerated women/girls than men/boys. This manuscript argues however that decisions made by the various stakeholders that play a role in the incarceration of men are inherently gendered. These decisions are based on patriarchal perceptions and stereotypes related to the familial roles of men and women, and by extension their motivations for offending. Few studies have sought to explore the nature of these perceptions, and the effect these may have on incarceration patterns. Indeed, this form of inquiry remains absent from the research agenda of Caribbean criminologists. Using qualitative data from Barbados, this book analyses the extent to which these factors are taken into consideration not only by the police and members of the judiciary, but by examining the gendered decisions made by shop managers and proprietors in cases involving shoplifting, it seeks to analyse the extent to which these factors are taken into consideration before incidents reach the justice system. Critically, this book seeks also to juxtapose these assumptions against testimony from men incarcerated at Her Majesty’s Prison. The large proportion of males in Caribbean prisons when compared to their female counterparts necessitates an investigation into the factors that may contribute to differential treatment as they move through the justice system. Using data from Barbados, the present study seeks to fill this need.
... Na lógica effectual, há espaço para a docilidade, em detrimento do oportunismo nas relações, como também há espaço para a ambiguidade de preferências entre os atores envolvidos. A noção de docilidade, introduzida por Simon (1991Simon ( , 1993Simon ( , 1997) e recuperada por Augier e Sarasvathy (2004) Os empreendedores experientes [...] procedem através de uma cadeia de interações com os stakeholders que conduz a compromissos específicos com um projeto potencial que só é determinado através do próprio processo de buscar esses compromissos. Esta cadeia de interações effectual põe em marcha dois ciclos -um ciclo expansivo de meios e recursos mobilizados que cada novo stakeholder acrescenta ao negócio, e outro ciclo de restrições sobre os possíveis objetivos e resultados do projeto que converge com os objetivos da organização resultante. ...
This article focuses on the process of new business creation, considering the effectuation approach, which explains the phenomenon of entrepreneurship in a different perspective than the traditional causal approach. Beginning with a description of the effectual approach assumptions, a case study about the subject is presented in order to explore the logic of the business creation process. The case discusses a Brazilian organization created in 1980 to produce materials and services in steel industry. Through structured interview with the entrepreneur who idealized the business, the main events in the early stages of the project are described. The results show the relationship between entrepreneur’s means available at the time of the enterprise creation and the new business design. In addition, the entrepreneur preferred a strategy of drawing instead of a decision one, and gave priority to strategic partnerships as a substitute of formal market research. All these aspects are covered by the effectual approach.
... Dieses Argument verkennt, dass es in der wissenschaftlichen Ausbildung nicht (primär) um Kosteneffizienz geht, sondern um die Angemessenheit der Ausbildungsinhalte. Zudem ist in dem genannten Argument eine interessierte Überpointierung der fehlenden Alternativen enthalten: Es gibt derartige Alternativen sowohl für den Bereich der Mikroökonomik (Shackle 1961;Leibenstein 1976;Simon 1997;Elsner et al. 2015) als auch für den Bereich der Makroökonomik (Kalecki 1969;Leijonhufvud 1973;Lavoie 2014). ...
Diese Studie verbindet konzeptionelle Überlegungen und empirische Methoden, um über den Pluralismus in der Volkswirtschaftslehre in Deutschland Auskunft zu geben. Ausgehend von einer Verständigung über die Eigentümlichkeiten dieser selbstreferenziellen „Normalwissenschaft“ und der Organisationsmerkmale der Post-Bologna Universität werden zum einen die Ergebnisse einer Befragung der Lehrenden an den 54 volks- und wirtschaftswissenschaftlichen universitären Fakultäten präsentiert. Zudem wird eine Analyse der in den Grundlagenveranstaltungen Einführung in die VWL, Mikro- und Makroökonomik behandelten Lehrinhalte unter Verwendung der Modulbeschreibungen und verfügbarer Lehrmaterialien vorgenommen. Insgesamt erbringen diese Untersuchungen den Befund, dass die bundesdeutsche Volkswirtschaftslehre einerseits durch eine unhinterfragte Engführung bzw. Standardisierung geprägt ist und andererseits eine durch institutionelle Hemmnisse gedämpfte sowie stark von der Einstellung der Lehrenden determiniere Bereitschaft existiert, diese Engführung in der Lehre zu überwinden.
... This provides more explanation, which can be ascertained from empirical evidence. It is important to identify the underlying factors leading to the manager's diversification strategy decisions and outcomes (Simon, 2009). Therefore, a mixed-method approach is needed to provide a more lucid explanation of the diversification and its effect on the construction firm's performance. ...
This research investigated the relationships between diversification strategies and productivity of large construction firms in Malaysia. The Generalised Method of Moments was adopted for modelling the impact of diversification strategies on productivity. The research revealed that product and market diversifications affect long-term productivity by altering firm efficiency in managing resource allocation. However, the effectiveness of diversification strategies depends on the changes in formal institutional dimensions and informal context of ownership concentration. The research findings will help construction firms to take into account the effects of institutional contexts when formulating their optimal diversification strategies for better firm productivity.
... Enterprises with ten and more employees are significantly more competitive than small micro-enterprises, and the Czech medium-sized enterprises are the most competitive on the market. There are more possible explanations for these findingslarger SMEs benefit from the size-related advantages, especially from the use of economies of scale and scope (Simon, 2009), better access to resources and capabilities (Nieto and Santamaría, 2010), better ability to face risks and random shocks (Aldrich and Auster, 1986), and better bargaining position with business partners particularly in times of increasing global market competition (Blažková and Dvouletý, 2019). ...
Purpose
The purpose of this paper is to examine the firm-level drivers of competitiveness of the Czech small- and medium-sized enterprises (SMEs) using the complex firm-level competitiveness index. The authors explored the relationship between firm competitiveness and firm characteristics such as size, age, industry affiliation and location.
Design/methodology/approach
The complex competitiveness index as a proxy for firm competitiveness was calculated from the survey data. In total, 132 complete questionnaires filled in by representatives of randomly selected Czech SMEs were collected in 2018. Additional firm characteristics (size, age, industry affiliation and location) considered as determinants of competitiveness were obtained from the commercial database Albertina and from the Czech Statistical Office. The determinants of competitiveness were tested econometrically by estimation of multivariate regression models.
Findings
The authors mainly found a significant relationship between the firm size and competitiveness of the Czech SMEs. The authors have also confirmed that the least competitive enterprises are those operating in the agricultural sector and that regional location plays an important role in the determination of firm competitiveness.
Practical implications
The identification of competitiveness drivers can provide entrepreneurs, managers and policymakers with important implications. It seems beneficial for the Czech SMEs to expand the scope of operations to achieve a larger company size, for example, by focussing on investment activities, direct marketing, improving entrepreneurial skills or by applying an aggressive sales strategy, especially towards markets with lower competition. Politicians may respond to these efforts by setting the appropriate policies that promote SMEs’ competitiveness, for example, through the hard and soft public support for financial and human resources.
Originality/value
Although many studies on competitiveness have been published, there is still a limited number of firm-level studies looking at competitiveness from multiple angles rather than from the study of profitability and productivity. In contrast, the study uses a complex firm-level competitiveness index based on ten competitiveness pillars (technology, human capital, products, domestic market, networks, international markets, online presence, marketing, decision making and strategy) to capture the contribution of different resources and capabilities to firm competitiveness.
... Die endgçltige Handlungsselektion erfolgt dann auf der Grundlage subjektiver Beurteilungen der Vorund Nachteile der perzipierten Handlungsoptionen. Die Konsequenzen der wahrgenommenen Handlungsweisen werden abgewogen und die subjektiv beste Alternative wird zur Realisierung ausgewåhlt -dies aber nach Maßgabe einer begrenzten und nicht einer globalen Rationalitåt (Simon 1997 Wikstraem et al. 2011;. Die angesprochenen Studien stehen allerdings nicht zur Gånze im Zeichen der Ladendiebstahlskriminalitåt, sondern benutzen diese lediglich als einen Testfall unter mehreren zur Analyse der Haltbarkeit der Theorie. ...
... The rational expectations hypothesis has garnered criticism with respect to the LC as well as other aspects of contemporary economics. The work of Herbert Simon (1997), which presents 'bounded rationality' and the concept of 'satisficing' as well as more 16 Lawson contends that there is a need for a new approach to policy formation and evaluation that does not rely on the predicative ability of models, which in general does not exist. Prediction requires closure that produces so-called event regularities of the form 'whenever x occurs then y occurs.' ...
In his influential 1976 paper, ‘Econometric Policy Evaluation: A Critique,’ Robert E. Lucas, Jr. presented the policy non-invariance argument, also known as the Lucas critique (LC). Drawing on the work of Putnam and Walsh, this paper discusses how the LC, like all works of scientific inquiry, contains values entangled with scientific facts, and argues that the Lucas critique devalued and revalued the highest values in macroeconomic science, a process known as ‘transvaluation.’ Most importantly, the LC worked to operationalize a shift in values that undermined belief in economists’ ability and responsibility to make meaningful interventions in the economy. Employing the language and concepts of continental philosophy, this paper discusses the meaning and effect of the LC on the values embedded in contemporary macroeconomic science.
... Contrary to DSGE models, and indeed to many other models in economics, ACE provides an alternative methodology to build macroeconomic models from the bottom up with sound microfoundations based on realistic assumptions as far as agent behaviors and interactions are concerned, where realistic here means rooted in the actual empirical micro-economic evidence (Simon 1977;Kirman 2016). The state of economics discipline nowadays is such that it is already subversive the view that in modeling exercises agents should have the same information as do the economists modeling the economy. ...
This work nests the Agent-Based macroeconomic perspective into the earlier history of macroeconomics. We discuss how the discipline in the 70’s took a perverse path relying on models grounded on fictitious rational representative agent in order to try to pathetically circumvent aggregation and coordination problems. The Great Recession was a natural experiment for macroeconomics, showing the inadequacy of the predominant theoretical framework grounded on DSGE models. After discussing the pathological fallacies of the DSGE-based approach, we claim that macroeconomics should consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This in turn implies that more is different: macroeconomics cannot be shrink to representative-agent micro, but agents’ complex interactions lead to emergence of new phenomena and hierarchical structure at the macro level. This is what is taken into account by agent-based models, which provide a novel way to model complex economies from the bottom-up, with sound empirically-based microfoundations. We present the foundations of Agent-Based macroeconomics and we discuss how the contributions of this special issue push its frontier forward. Finally, we conclude by discussing the ways ahead for the fully acknowledgement of agent-based models as the standard way of theorizing in macroeconomics.
... On an optimistic note, the recent developments set out in section 1 can be viewed as promising advances towards an empirically based and methodologically pluralistic economics, as the one advocated by Herbert Simon (1997). Despite the validity problems associated with the enlarged empirical economics of our time, the situation seems better than the one during the deductivist period, characterized by its validity elussiveness. ...
This article focuses on the impact that the recent widening of empirical economics has on the quest for validity in this field. We begin by summarizing the continuous evolution from a primarily deductive economics to a more empirical one, especially emphasizing the broader experimental and survey-based evidence. Although these developments pave the way for an economics with greater empirical support, they also bring into this field the same validity concerns that mainstream economists naively thought to be avoidable (i. e., concerns with the external validity of experiments and with "test validity" issues largely addressed in other social sciences). We show how, ultimately, such developments force economists to confront some serious challenges and limitations in the quest for validity arising from four ontological peculiarities of the social domain: 1) the awareness of the inquiry on the part of the subject being studied; 2) the lack of relevant structural homogeneity between individuals' shared psychological properties; 3) actions holistic dependence on the individuals' complete past; and 4) the variable and holistic nature of cultural, conventionally mediated forms of interaction. We finally argue that openly acknowledging these problems would help economists to tone down their scientificity claims and avoid pseudo-scientific practices like endorsing assumptions refuted by experience.
Agent-based modeling (ABM) is a novel computational methodology for representing the behavior of individuals in order to study social phenomena. Its use is rapidly growing in many fields. We review ABM in economics and finance and highlight how it can be used to relax conventional assumptions in standard economic models. ABM has enriched our understanding of markets, industrial organization, labor, macro, development, public policy, and environmental economics. In financial markets, substantial accomplishments include understanding clustered volatility, market impact, systemic risk, and housing markets. We present a vision for how ABMs might be used in the future to build more realistic models of the economy and review some of hurdles that must be overcome to achieve this. (JEL C63, D00, E00, G00)
To quote this resource: Dorian DUTOIT-PROUST, “Relevance and Effectiveness of sui generis instruments to tackle exclusionary practices in the Digital Economy”, Competition Forum – Resources, 2024, n° 0015, https://competition-forum.com
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Effectuation has become the basis for educating entrepreneurs and managers. Derived from cognitive and behavioral economic studies of expert entrepreneurs, effectuation shows how to cocreate value in highly uncertain situations. The framework of effectuation consists in techniques that minimize the use of predictive information and ways to turn control itself into strategy. In doing so, the effectual process opens up radically new ways to rethink a variety of fundamental concepts in all the social sciences. This ranges from risk and return to markets and governments in economics; attitudes toward ends and means in psychology; opportunism and altruism in social psychology; and even success and failure in strategic management. Effectuation theory inverts several older approaches in what Herbert Simon referred to as the 'sciences of the artificial'. These inversions suggest an entrepreneurial method based on non-predictive control that complements the predictive control techniques of the scientific method.
Pour J-L Le Moigne, le concept d’auto-éco-réorganisation et la conception de l’organisation qui le sous-tend introduisent un renouveau, une nouvelle perspective voire un changement de paradigme pour penser les systèmes complexes que sont les systèmes ou organismes sociaux tels que les entreprises, municipalités, hôpitaux etc.. Pour J-L Le Moigne, ce concept d’auto-éco-ré-organisation prolonge la réémergence du concept d’organisation à l’initiative notamment de H.A. Simon et surtout E. Morin. Cet article vise tout d’abord à dépeindre ce paradigme de l’organisation auto-eco-ré-organisatrice, selon J-L Le Moigne avec ses dimensions d’autonomie, de relation synchronique à l’environnement (éco-organisation), dans un processus diachronique récursif. Puis l’apport de ce concept est exploré au travers des auteurs qui l’ont mobilisé dans le domaine du management en termes d’adaptabilité, de changement et en termes d’innovation.
We address the basic framework of quantity adjustment theory and its significance in evolutionary economics. Quantity adjustment theory explores the mechanism of the short-term process by which capitalist firms adjust their production and raw material orders according to the demand for their products under constant prices. It finds the key features of capitalist product markets in demand constraints on production and sales competition among buyers, firms’ demand-satisfying supply behavior with buffer inventory holding, quantity adjustment process as its interactions, and continuous demand satisfaction with the permanent existence of surplus resources on the sellers’ side. As a loop composed of these features, capitalism is a production system that satisfies the needs and wants already or to be expressed through product markets. The model analysis of the quantity adjustment process indicates that individual demand-satisfying supply behaviors and their interactions result in overall buyer demand satisfaction. Stable and smooth process progression is secured by sellers’ moderate averaging in demand forecast formation based on past demands and by maintaining moderate ratios of buffer inventories to the forecasted demand. Under these conditions, firms can adapt their production to gradual changes in final demand without the duration or propagation of shortage. Quantity adjustment theory clarifies the mechanism sustaining the stationary circulation of the capitalist economy and reformulates the effective demand principle on its basis. It provides new insight into the functions of money and prices by elucidating the conditions for money to be swiftly exchangeable with any product and for prices to have the stability necessary to function as the efficiency criterion. While placing buyers of products in a dominant position in the short run, these conditions provide firms with motivations and favorable material conditions for demand-oriented innovations in the long run.
Technodeterminism determines the main task for civil law when solving issues related to blockchain technologies and smart contracts. This task is connected with the search for answers to the question of the need to amend civil legislation in order to adapt it to new technological challenges or about the possibility of effective application of existing legal norms to the regulation of innovative civil relations.
In the doctrine, there is a hypertrophied attitude towards blockchain and smart contract technologies. The standing exists that due to smart contracts, trust in people is replaced by trust in the code. Eschatological predictions were made about the beginning of the end of classical contract law, about emergance of «contract law 2.0». The paper states that the digital code will not be able to replace reality in the field of contractual relations. The revolution in contract law has not happened. Instead of the «revolutionary path» highlighted by some authors, there is a gradual evolutionary development of ideas about a civil contract. The civilistic doctrine has responded to technological challenges by becoming rhizomorphic in its interdisciplinarity, trying to comprehend the legal phenomena associated with the digitalization of public relations.
The «ideological core» of the civil doctrine, the «core» of the concept of the contract, remained untouchable. A legal smart contract has remained a speculative phenomenon from a parallel reality, a simulacrum. The Russian and foreign doctrines are dominated by the traditional interpretation of a civil contract, since the concept of a legal smart contract is not able to solve the problem of its incompleteness. From the perspective of futurological perspective, it can be assumed that the traditional approach to the contract will retain its significance, and the digital code will have only an auxiliary, servicing value for the contract.
This entry provides an overview of Sidney G. Winter’s academic career, some of his early work, and the ideas it built on. The evolution of the program that he and his collaborators launched more than 50 years ago is briefly described. We point out that Winter’s work is a goldmine of inspiration for those who wish to understand and address many of the problems that are challenging today’s businesses and policy-makers across the globe.
New security economics is a new and emerging field. It relates to defence economics in much the same way that the field of strategic management relates to the field of economics; it builds upon some similar foundations, but it is more interdisciplinary and more dynamic in scope and content. This article presents a brief introduction to the framework of new security economics, its relationship to strategy and some current themes and topics in the field.
In this article we seek to show that there is a common framework to the various approaches known as heterodox. This framework is the "institutionalism", which take into account the concrete institutions in which the economic process proceeds. To argue our thesis we deploy two types of justification. We begin with an historical justification which borrows from the history of the thought and will find in emblematic authors (Ricardo, Marx, Keynes, Polanyi) (1) the definition of a common object for an institutionalist political economy (the study of a "Monetary economy of capitalistic production"); (2) a common general standard of the economy like "an institutionalized process between men and environment" (against the definition of Robbins). Our second justification is a more epistemological one. We develop the way in which the institutionalist approach mobilizes the concepts of action and of institution. The goal of this article is to contribute to the emergence of a positive paradigm, common to the heterodox, which is not defined any more in hollow or negative in opposition to the neoclassic "main stream".
Accroissement de la complexité des décisions dans un contexte de prolifération des règles Résumé Cet article décrit comment la prolifération des règles impacte la complexité en prise de décision. Bien que ce phénomène soit connu, peu de chercheurs ont étudié la prolifération des règles et son impact sur la prise de décision. Ainsi, bien des décisions managériales sur les règles sont basées sur des connaissances communes plutôt que sur des connaissances scientifiques. Le modèle illustre la complexité de la prise de décision en examinant les coûts de recherche, les coûts de calcul et les coûts de complexité à différents niveaux de complexité de prolifération des règles. Il conduit à une série de propositions pouvant être testée empiriquement. Le modèle permet aux dirigeants de comprendre comment la prolifération des règles interagit avec la prise de décision et intensifie la complexité.
Abstract This paper depicts how rule proliferation impacts decision making complexity. Although this phenomenon is known, very few scholars have studied rule proliferation and its impact on decision making. Hence, most managerial decision making on rules is based on common knowledge as opposed to scientific knowledge. This model reveals decision making complexity by examining search costs, calculation costs and complexity costs at different rule complexity levels. It leads to a series of propositions ready to be empirically tested. Our paper helps manager understand how rule proliferation interacts with decision making and intensifies complexity.
O objetivo deste trabalho é mostrar a possibilidade da aplicação da economia comportamental como catalizadora de resultados em uma política pública. Primeiramente, é preciso mostrar a existência da racionalidade limitada que pode interferir no processo de escolha dos indivíduos. Ademais, é importante legitimar as interferências governamentais que visem a correção de comportamentos sem o uso da coerção. Como estudo de caso, será utilizado o quadro de doação de medula óssea no Brasil. Após a aprovação da lei 13.656/2018, que concede isenção de pagamento da taxa de inscrição de concursos públicos para os cadastrados como doadores de medula, há uma possibilidade de agravamento no quadro de desistências de doação. Dado que a recusa pode ser fatal ao paciente à espera do transplante, será importante a formulação de políticas públicas que promovam o cadastramento consciente, sendo os conhecimentos desenvolvidos pela teoria comportamental um candidato viável.
Based on Herbert Simon's conceptualization of bounded rationality, this study develops and tests an integrative model of the strategic decision-making process (SDMP) and outcomes in public organizations. The model integrates different SDMP dimensions—procedural rationality, intuition, participation, and constructive politics—and examines their impacts on the successful implementation of strategic decisions. Additionally, it analyzes the influence of implementation on the overall outcomes of strategic decisions. The model was tested with multi-source data on 170 strategic decisions collected from senior executives working in 38 public organizations in Qatar—a context in which studies on decision-making are rare. With the exception of intuition, this study shows a positive impact of all SDMP dimensions on the successful implementation and outcomes of strategic decisions. Successful implementation fully mediates the relationships between procedural rationality, participation, and constructive politics and the outcomes of strategic decision.
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One of the many remarkable qualities of Stefano Zambelli is the breadth of his research interests. From a brief examination of Zambelli’s scientific contributions, projects development activities, and research breakthroughs, it is readily noticeable that he has not worked in a single narrow area. Instead, his research efforts have resulted in an unusually broad set of theoretical and empirical findings across several strands of the economics literature. Among these strands, Zambelli’s (1994) manifesto on the logic of computability signalled a sea change in his approach to research helping to build the program known as computable economics. In this chapter, written to honour a fraternal friend and a praeternatural scientist, the role of computability is briefly discussed, so that to provide some expository remarks concerning the main interpretations of the foundations of mathematics for a post-Neoclassical age in economic theory.
We start out with an observation that TCE conflates opportunism, bounded rationality, and uncertainty. We then propose ways to increase their definitional precision. Particularly, we highlight the need to categorize uncertainties according to their perceived controllability, which not only better fits a behavioral approach but also broadens the scope of uncertainties for TCE research. Next, we discuss whether opportunism is a necessary assumption in TCE and whether TCE is suited to the study of uncontrollable uncertainties. We conclude that, instead of opportunism, uncertainty controllability is what TCE tacitly assumes. Considering that the conflation originates from TCE’s lack of a clear philosophical foundation, we proceed to call for critical realism (CR). The link between CR and effectuation and that between uncertainty controllability and effectuation are articulated.
This chapter briefly explains the need for behavioral theories of the firm, describes the characteristics thereof, and presents opposing views about whether transaction cost economics (TCE) is behavioral. Based on an evaluation against these characteristics, we find TCE falling short of being a behavioral theory of organizational decision-making. Subsequently, we suggest factors which prevent TCE from being behavioral. This chapter concludes with a roadmap of the book.
To make TCE behavioral and then apply it in empirical settings, a clear understanding of how to model bounded rationality is indispensable, considering some common confusions surrounding (bounded) rationality. We overcome these confusions by distinguishing between the brain, the mind, and the self, and presenting the triune theory of the brain and the eight-consciousness model of the mind. We then propose that cognitive bounds (as a property) and rationality (more accurately rationalizing, as a process) should be conceptually separated. We suggest that cognitive bounds can be socially affected and cultural distance reflects change in cognitive bounds. We conclude by suggesting that ‘bounded rationalizing process’ should be modeled from a critical realism perspective through the diminishing effects of cognitive bounds, which consider human agency through learning.
This article considers whether degree apprenticeships could disrupt traditional university routes to professional careers and redress longstanding inequalities in access between individuals from different social backgrounds. Using the solicitors’ profession as a pertinent case, issues of access and choice are explored, utilising Breen and Goldthorpe’s theory of Relative Risk Aversion (1997) to understand variation across social background. Drawing on 23 in-depth interviews with law students, trainee solicitors and solicitor degree apprentices from four universities and five law firms across England, the analysis illuminates the decision-making approaches of aspiring solicitors through both the university and the degree apprenticeship routes. Contrary to expectation, the degree apprenticeship route appears to be discounted as unfamiliar and risky by many of those from disadvantaged backgrounds. Instead it is tactically adopted as an alternative by some middle-class students. As such, the degree apprenticeship is not likely to disrupt existing patterns in access to the solicitors’ profession.
The article aims to demonstrate that the nudge theory suffers from three main weaknesses stemming from its theoretical dependence on behavioural economics. The first two weaknesses endanger the paternalistic goal, whereas the third does not justify the libertarian attribute. The first weakness lies in the incomplete realistic characterisation of behavioural economics theory that is the central theoretical pillar of Nudge theory. The second weakness is even more relevant. The normative model of behavioural economics is neoclassical rationality. It can be applied to choices in conditions of risk, when it is possible to forecast the probability of the outcomes of one’s choices. On the contrary the real life problems are inside a complex and uncertain environment. In an uncertain environment the neoclassical algorithms are no longer valid, in that they postulate the knowledge of the probability of the outputs. Thus errors and bias, as observed in behavioural economics, are not such in many instances, but they are instead adaptive and therefore rational responses to the context of decision-making. Therefore nudge theory that pursues the normative paternalistic objective of neutralising the bias and judgement errors discovered by behavioural economics and putting paternalistically the citizen on the right track, is in fact proceeding in the wrong direction. The last weakness concerns an assumption of Nudge theory about the duality of mind. System 1 represents the intuitive mind, while System 2 corresponds to the analytical one. System 1 tends to make decisions quickly and unconsciously, while System 2 follows a slow and conscious process. Biases and judgement errors are mainly generated by System 1. However, System 2 may later intervene to correct them. From this premise, the Nudge theory affirms its libertarian character. In this paper I will argue that the dualism of the mind would not entail the reversibility of some nudges, particularly of default states. In this way the fundamental pillar is weakened to justify the libertarian character of the nudge theory.
On Multiple Selves refutes the idea that a human being has a single unified self. Instead, David Lester argues, the mind is made up of multiple selves, and this is a normal psychological phenomenon. Lester expands on his earlier work on the phenomenon, illuminating how a “multiple-self theory of the mind” is critically necessary to understanding human behavior. Most of us are aware that we have multiple selves. We adopt different “facade selves” depending on whom we are with. Lester argues that contrary to the popular psychological term, “false self,” these presentations of self are all part of us, not false; they simply cover layers of identity. He asserts that at any given moment in time, one or another of our subselves is in control and determines how we think and act. Lester covers situations that may encourage the development of multiple selves, ranging from post-traumatic stress resulting from combat to bilinguals who speak two (or more) languages fluently. Lester’s views of multiple selves will resonate with readers’ individual subjective experience. On Multiple Selves is an essential read for psychologists, philosophers, and social scientists and will fascinate general readers as well.
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