Nudges could help us make optimal rather than satisfactory decisions. Working on a task together also reduces the amount of time each of us has to spend on it, meaning that we may have more time to do in-depth research about the task at hand, and expand our available information.Ĭompanies and professionals can also use a nudge, a form of choice architecture, which is a thought-out design of environments under which people make decisions. People come to the table with different brain capacities from their previous knowledge and life-experience. Since, as individuals, we will always be affected by bounded rationality, working in groups or teams can help us overcome some of the limitations of bounded rationality. It also isn’t effective to try to acquire all knowledge about different alternatives when making a decision for one, this would take too long, and even if we had access to all the necessary information, we probably wouldn’t be able to process it. They know that we don’t have the time to inform ourselves on the fine print of each qualifier or look at the nutritional labels of every product we buy.īeing aware of bounded rationality does not help us to overcome it, because knowing about the limits of our thinking capacity, the information that is available to us, and time, does not make those limitations disappear. If we do not want to be taken advantage of by businesses and marketing, it is important that we maintain an awareness that they are playing into bounded rationality. As Sprulock shows in the film, farmers can get away with constructing a fenced space that only extends a few feet outdoors, which they open up for a few minutes each day, and convince consumers that they are being ethical. 4 That doesn’t actually mean that they go outside. 3 For example, fast-food restaurants are allowed to say that their meat is made from “free-range” chicken if the chickens have the option of going outside for part of the day. Morgan Spurlock, director of Super Size Me 2: Holy Chicken!, explores what the requirements are for restaurants to be allowed to label foods with certain qualifiers. We may believe we are buying ethical or healthy options, thereby making a decision that satisfies us, but in reality, we are not achieving the most optimal decision for our ethical or healthy objectives. These qualifiers are vague, and often do not mean what we think they do. Other examples include the labels “sugar-free”, “organic” or “whole-wheat”. Often they mark their products with enticing qualifiers and descriptors that have little-to-no meaning, such as the term “cage-free” on a carton of eggs. We need to be aware of our imperfect decision-making, because businesses will use marketing tactics to try and benefit from it. 2 We make “good enough” decisions instead of the best ones, leading us to choose inconsistently. Economists call us “satisficers” instead of “ homo economicus”, which means the “perfect rational man/woman”. Bounded rationality is sometimes a necessary imperfection when we understand decision-making as part of a network, rather than theorize rationality based on a ‘perfect’ subject that is not a part of these complexities.īounded rationality causes us to make satisfactory choices, but that does not mean that those choices are optimal. Here, the rationality of CEOs and other decision-makers are bound in a different way, by their environment which asks them to put the needs of the company before their own. Rationality becomes all the more complex in a company where an individual’s optimal choice may not match the optimal choice for the company. With constraints like time, the choice that is made may only be satisfactory rather than optimal for the company’s objectives. Individuals are influenced by more than mere logic, and sometimes, decision-making individuals in companies have to make quick decisions that will impact the rest of the organization. While organizations want to make decisions that reflect their economic values and objectives, these decisions are made by individuals. The decisions that ought to be made by institutions are often with economic principles in mind, but these do not take into account the reality that humans do not function in a perfectly rational way. In any organization or institution, there are complex webs of decision-making.