ABSTRACT
In his autobiography, Simon (1991a: 270-271) recounts increasingly violent disagreements with mainstream economists, leading him to abandon, for a period, economics in favor of psychology and computation science. “By the time I returned to a concern with economics in the 1970s,” he observed, “the war was open and declared.” Indeed, many of Simon’s writings from that period (Simon 1976, 1978, 1979) are so sharply formulated that it seems quite likely that at least Simon himself felt that he was part of a war.4 (It is actually harder to find specific and concerted critique, at least in print, of Simon and BR, such as one would expect of a genuine war.)
However, at exactly the time when the supposed war was going on, an important part of economics, namely the theory of the firm, seemed to be increasingly influenced by considerations of BR. New, serious approaches to various aspects of the theory of the firm that all appeared to be solidly based on bounded rationality were mushrooming. Thus, team theory (Marschak and Radner 1972), transaction cost economics (Williamson 1971), and the evolutionary theory of the firm (Nelson and Winter 1973) all appeared in the beginning of the 1970s (although their roots go further back). These, still flourishing, approaches all seemed to start from bounded rationality,5 exactly as Simon would like them to. And the explicit motivation for such a starting point was that neoclassical theory of the firm and its behavioral starting point in substantive rationality excluded concern with such vital phenomena as incomplete contracts, the role of organizational structure and organizational routines.
