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The fact that goals may be dependent for their force on other more distant ends leads to the arrangement of these goals in a hierarchy - each level to be considered as an end relative to the levels below it and as a mean to the levels above it.

We will likely also find that the nature of the problem to be solved will be a principal determinant of the mix. With our growing understanding of the organization of judgmental and intuitive processes, of the specific knowledge that of the specific knowledge that is required to perform particular judgmental tasks, and of the cues that evoke such knowledge in situations in which it is relevant, we have a powerful new tool for improving expert judgment. We can specify the knowledge and the recognition capabilities that experts in a domain need to acquire, and use these specifications for designing appropriate learning procedures.

Since my world picture approximates reality only crudely, I cannot aspire to optimize anything; at most, I can aim at satisficing. Searching for the best can only dissipate scarce cognitive resources; the best is the enemy of the good. (p.361)

Global rationality, the rationality of neoclassical theory, assumes that the decision maker has a comprehensive, consistent utility function, knows all the alternatives that are available for choice, can compute the expected value of utility associated with each alternative, and chooses the alternative that maximizes expected utility. Bounded rationality, a rationality that is consistent with our knowledge of actual human choice behavior, assumes that the decision maker must search for alternatives, has egregiously incomplete and inaccurate knowledge about the consequences of actions, and chooses actions that are expected to be satisfactory (attain targets while satisfying constraints).

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If we accept values as given and consistent, if we postulate an objective description of the world as it really is, and if we assume that the decision maker's computational powers are unlimited, then two important consequences follow. First, we do not need to distinguish between the real world and the decision maker's perception of it: he or she perceives the world as it really is. Second, we can predict the choices that will be made by a rational decision maker entirely from our knowledge of the real world and without a knowledge of the decision maker's perceptions or modes of calculation. (We do, of course, have to know his or her utility function.)

If there were no limits to human rationality administrative theory would be barren. It would consist of the single precept: Always select that alternative, among those available, which will lead to the most complete achievement of your goals.

In the process of decision those alternatives are chosen which are considered to be appropriate means of reaching desired ends. Ends themselves, however, are often merely instrumental to more final objectives. We are thus led to the conception of a series, or hierarchy, of ends. Rationality has to do with the construction of means-ends chains of this kind.

Economic man deals with the "real world" in all its complexity. Administrative man recognizes that the world he perceives is a drastic simplified model... He makes his choices using a simple picture of the situation that takes into account just a few of the factors that he regards as most relevant and crucial.

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The function of knowledge in the decision-making process is to determine which consequences follow upon which of the alternative strategies. It is the task of knowledge to select from the whole class of possible consequences a more limited subclass, or even (ideally) a single set of consequences correlated with each strategy.