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Abstract:
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I discuss and compare alternative approaches to integrating bounded rationality with the theory
of economic organization, concentrating on the organizational capabilities approach, which is
strongly influenced by the works of Nelson and Winter, organizational economics, particularly
transaction cost economics, and, finally, a small subset of the literature on biases to judgment
and cognition. I argue that, contrary to the conventional view, both the organizational
capabilities approach and transaction cost economics treat bounded rationality rather “thinly,”
the former being in actuality more taken up with organizational routines than individual
boundedly rational behavior, the latter only invoking bounded rationality to the extent that it
helps explaining incompleteness of contracting. The rich literature on cognitive biases, etc.
suggests a “thick” approach to bounded rationality that may be helpful with respect to furthering
the theory of economic organization. Examples pertaining to the internal organization of firms
are provided. |
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