Rationality and Bounded Rationality

Since the 1950s, a new understanding of rationality and its limits has been prompted by the obvious experience that there is a strong tension between the normative classical model of autonomous or unbounded (perfect) rationality and the describable psychological effects and biases that strongly influence sound judgment, reasoning, and decision-making under limited internal and external circumstances. To this end, the American economist Herbert Simon (1916–2001) introduced the concept of “bounded” or “limited” rationality. The concept describes a relationship between a person’s mental abilities and the complexity of the problem he or she faces. Because humans are severely limited in their cognitive and computational abilities, knowledge is always incomplete, and time is fixed. All these mental characteristics have behavioral consequences that significantly affect decision-making. As a truly interdisciplinary topic, the notion of bounded rationality has recently gained considerable popularity also in the social sciences, especially in politics. In the context of political decision-making, people are subject to cognitive biases and use certain heuristics to make decisions. Populist politicians take advantage of this limitation of human rationality by spreading false messages that match or induce their voters’ cognitive biases or by using bounded rationality as a means of creating enemies in the minds of the electorate.