Markets, Productivity, and Happiness in a Historical Perspective

Herbert Simon`s Bittersweet relationship with the Cowles Commission (1947-1954)

Judith Favereau, Université Lumière Lyon 2
Assous Michael, Université Lumière Lyon 2
Olivier Brette, INSA
Alexandre Chirat, Université Paris Nanterre

The recent Nobel Prizes in economics (e.g. Banerjee, Duflo, and Kremer in 2019; Card, Imbens, and Pischke in 2021) insist on the importance for economics to be an applied discipline. The understanding of human behaviour and decision making seems intimately link to such a wish of applicability as another recent Nobel Prize in economics highlights — the attribution of such a Prize to Richard Thaler in 2017. Already during the second half of the 20th century, Herbert Simon’s researches emphasised these two dimensions. First, Herbert Simon is often presented as the canonical figure of “bounded rationality”. Second, his attempt to make economics an operationalizable discipline is also famous, as his numerous participations into several institutions highlighted. Simon’s work into these institutions and how they shaped his research agenda has been widely studied, especially at the RAND. Surprisingly, Simon’s activities at the Cowles commission remain largely unexplored; while Simon and the Cowles shared this twofold wish to operationalise economics and to formalise human decision making. This is also during his time at the Cowles that Simon produces his emblematic paper formalising bounded rationality. Furthermore, Simon claims that his participation at the Cowles was decisive in his awarding of the Nobel Prize. Thus, scrutinising Simon’s time at the Cowles appears crucial. The aim of the paper is to produce such a scrutiny. For that purpose, we mobilise three type of historical materials: both Simon’s and the Cowles archives, as well as the papers Simon published as a Cowles consultant, and finally Simon’s correspondences with the Cowles research directors. The articulation of these materials enables to analyse both Simon’s work as well as how his work was received by the Cowles members, more specifically by the Cowles research directors. We show, surprisingly again, that Simon’s canonical paper on bounded rationality was coldly received at the Cowles. Thus, the claim of the paper is that Simon’s relationship with the Cowles was a bittersweet one. Indeed, such a collaboration started enthusiastically from both sides and ended surrounded by indifferences. We offer three explanations to this bittersweet relationship. First, both the Cowles and Simon shared a wish to mathematize decision making problems; although, they had different conceptions about mathematical tools and the articulation between theory and empirics. Second, the irreconciability of their conception of optimality threatened their common interest in operational research. Third, and more globally, Simon’s and the Cowles’s research agendas were not stabilised during this period explaining the enthusiastic phase as well as the cold one, once these two research agendas stabilised, but on different directions. The paper distinguishes five periods from 1947 to 1954 during Simon’s time at the Cowles. Each section of the paper deals in turn with one of these five periods. Section 6 concludes.


Keywords: Herbert Simon, Cowles Commission, bounded rationality, mathematisation

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