Herbert Simon Bounded Rational Theory Case Study

1505 Words 7 Pages
Linking cash transfer to Herbert Simon’s bounded rational theory (Group component):

The government of India had actually three policy choices to be made -

Policy 1- whether to completely go for cash transfer for all the social welfare programs

(including for food distribution).

Policy 2- whether to continue with the existing “in kind” subsidies and no cash transfer.

Policy 3- whether to partially go for cash transfer for some benefits like scholarship, old

age pension etc and continue with existing system of public distribution system(pds) for

distributing food grains only.

According to’ Herbert Simon’s’ bounded rational theory the policy maker would know that

distributing cash directly to the beneficiary account instead of selling
…show more content…
Rational model: is a economic model of decision making which is based on cost benefit

analysis. This is also referred as root model of decision making. The emphasis here is to

access all the information relevant to the problem and based on this data all the alternatives to

be constructed. Based on the accurate predictive power, the relative effectiveness of each of

these alternatives to be established and to choose the one best among the rest.

But ‘Herbert Simon’ had reservations about this rational model. It is simply not real for an

individual to know the consequences of all the alternatives. So simon says decisions are

bounded rational. Decisions are satisficing rather than maximising. As explained above

the policy maker of the cash transfer scheme had only four alternatives (choices) whose

advantages and disadvantages were known to him. It was impossible for a decision maker to

have infinite alternatives in front of him and predict the consequences of all the alternatives.

So here (cash transfer scheme) the criteria of efficiency was used rather than criteria of

adequacy in decision making.

LAW (how authority is sought and

Related Documents