Decision
Making Typologies
Simon’s normative model of
decision making
Simon’s model can be
characterised by two main themes: the notion of bounded rationality of the decision makers and the sequence of intelligence gathering, the design of a model of the problem with
criteria and alternatives, the choice
which includes or might include a sensitivity analysis and a detailed plan for
the final phase, implementation.
Bounded rationality in my
understanding is simply elevating a realistic human factor into the science of
economics. It affects all four steps of the normative model, as depicted in Diagram 1.
Diagram 1:
So, what is outside of
bounded rationality? Of course, it is boundless rationality: the homo
economicus, Bill Gates, Angela Merkel and Jim Jefferies. Not me.
I recently decided to move
to Broome and my thinking can be closely aligned to the model. I used all the
rational techniques I had at hand: my existing knowledge of the topic, the
knowledge of tools and means to gather more information, tried to assess the
outcomes of the decision for middle and long term and also listing all the
options I had after receiving a permanent resident visa in February. I have a
great track record of making fabulous decisions based on my rationality.
However, I have another track record of my failed decisions based on my
rationality. Hmmm.
Anyways, my options were
to stay in Perth, to move to Broome or to move to Brisbane (Sydney is too
metropolitan, Melbourne is too cold, except when it is too hot, except when it
is too windy). Once I fixed my options, I started to gather information: I used
the internet but I also relied heavily on commentaries of friends and
acquaintances. Based on that information I tried to work out how the future
will unfold in each of the choices and if they meet my criteria and match my
ideas of living happily ever after. When that was done, I made my choice,
opting for the best looking version and made preparations for the
implementation of this choice (buying a 4WD, transferring to distance learning,
obtaining useful certifications to support myself while living in Broome and
travelling in the northern areas). And then I went through all the preparations
and set off towards Cable Beach.
Diagram 2: stopover on the
trip to Broome in the Karijini NP, Hancock Gorge, Kermits Pool
“Clash of the Titans”
When in the design phase,
I asked myself questions that I couldn’t answer and had to go back and gather
more information multiple times. After I made my choice, I found I really need
to learn more about Broome – and then the more I did learn the less sure I
became of the choice and started gathering relevant information about my other
choices and updating my scenarios. This means that when complexity and/or
uncertainty arises the decision model will not be linear, sequential but a
zigzag pattern will emerge.
I think the model is still
very useful in two ways:
- reminding ourselves about
having bounded rationality is GREAT! Decision makers tend to forget that in my
experience and routine, gut decisions could be reviewed using it as a sort of double
checking if the environment is still the same
- it can be a powerful tool
when facing linear but broad information based projects (financial investment,
tropical garden, building project).
References:
Simon, H. A., 2000. Bounded Rationality in Social Science: Today
and Tomorrow, Mind &
Society, 1, 2000, Vol 1, pp 25-39.
Simon, H. A., 1959. Theories of decision-making in economics and behavioural science, The
American Economic Review, Vol XLIX, June 1959, Number Three
