Book review 2 administrative behavior

Posted by AJ's Blog on July 21, 2018

Book Review 2 - Administrative Behavior

ADMINISTRATIVE MAN VERSUSIAS ECONOMIC MAN

A review of Herbert A. Simon’s Administrative Behavior: A Study of Decision-makingProcesses in Administrative Organizations,4th edn, New York: Free Press, 1997. Pp. xv +368. ISBN 0 684 83582 7 (paperback).

Commemorating the fiftieth anniversary of the book’s first publication, the Free Press has recently issued the fourth edition of Herbert Simon’s Administrative Behavior. Simon began planning the original manuscript in 1937, at the start of his graduate career. In 1943, it earned him a PhD in political science from the University of Chicago, which, in turn, gained him a position at the Illinois Institute of Technology. Around 1945, Simon revised his ‘thesis, circulated it for comments, revised it again, found an editor willing to risk it (Donald Porter Geddes at Macmillan), and published it in 1947’ (Simon 1991: 88). More than thirty years after its original publication, Simon’s ‘epoch-making book’ was cited in his 1978 Nobel Price for Economics, which he received ‘for his pioneering research into the decision- making process within economic organizations’ (Carlson 1992: 336). Translated into over a dozen languages, including, for example, Dutch, Finnish and Indonesian, the first edition of Administrative Behavior was followed by a second release in 1957, a third in 1976, and now a fourth in 1997.

Simon’s interest in administrative behavior originated in a study of public recreation in Milwaukee that he performed as part of his undergraduate education (Simon 1991: 64-5). It was further stimulated in 1938, when he became a staff member of the International City Managers’ Association, where his duties included informing experienced city managers how to run a city (Simon 1991: 69-77). In 1939, while still a graduate student, Simon became Director of Administrative Measurement Studies at the Berkeley Bureau of Public Administration, where he continued his contributions to the understanding and solution of municipal problems (Simon 1991: 78-83). In seeking answers to these questions of municipal organization, Simon soon ‘discovered that no theory existed that could provide the answers’ (Simon 1957: xiii; also see Simon 1976: xv).

The so-called classical organization theory that dominated the literature at that time stressed the orderliness in organizations based on a clear division of labor and departmentalization, a unity of command, and a limited span of control for each manager (Simon 1991: 72-3, 117-18). It divided organizations into sections and branches and called for manuals describing the function of each. The classical theory was challenged by two alternatives, one focusing on human relations and motivation and the other stressing decision making. Simon’s response to these two contestants was: ‘Both made sense to me, and the latter, especially, resonated with my previous studies of the Milwaukee recreation programs and the measurement of city services’ (Simon 1991: 73).

It was Simon’s desire to elaborate on these alternative approaches that inspired him ‘to write a theoretical doctoral thesis on decision making in administration’ (Simon 1991: 74). While engaged in this work, Simon encountered Chester Barnard’s (1938) The Functions of the Executive, read it with ‘painstaking care’, examined it closely in a discussion group he led, and found it compatible with his own preference for looking at management in decision-making terms (Simon 1991: 72-3, 8 6 8 ) . From Barnard, Simon borrowed directly such notions as authority, the ‘zone of indifference’ or ‘acceptance’, and the equilibrium of inducements and contributions, and adapted indirectly ideas such as organizational identification and bounded rationality. Barnard not only supplied Simon with extensive comments on his manuscript, but also accepted Simon’s subsequent request that he contribute a foreword to the book. In this, Barnard wrote that he considered Administrative Behavior to be ‘an important contribution to the social science of formal organization and administration’.

According to Simon, ‘Chester Barnard’s foreword undoubtedly contributed to [the book’s] good reception’ (Simon 1991: 88). Yet, though this preface was included in the first three editions, it is unfortunately no longer part of the most recent release. The second edition, published a decade after the first one, added an introduction to the original text in which Simon, as it later turned out wrongly, observed: ‘My present forecast - and a rather confident one - is that when a second decade has passed this book will sound a bit old-fashioned’ (Simon 1957: ix). The text of the original work was also kept intact in the third release, but was augmented with ‘considerable additional material that develops and illustrates some of the important themes of the first edition’ (Simon 1976: ix).

Disliking the lack of unity in the tripartite organization (lengthy introduction, original text, reprints of recent articles) of the third edition, Simon rewrote his commentaries for the current publication and rearranged them such that they append to each of the chapters of the first edition, remarking: ‘But although I have no urge to recant, I do wish to augment the text considerably’ (Simon 1997: viii). The original text contains eleven chapters, of which the first gives a general introduction and the last a broad illustration. Chapters I1 and I11 lay out some of the methodological issues concerning administrative theory. They illustrate Simon’s original intent to write on the logic of administration (Simon 1991: 53,74,87). Chapters IV and V construct Simon’s theory of human decisionmaking in an organizational environment. In evaluating the connections between individuals and organizations, Chapter VI builds a bridge to the remainder of the book. The subsequent chapters, VII through X, examine the main processes through which organizations influence human behavior. The extensive commentaries on each of the eleven chapters develop and illustrate some of the original text’s ‘important themes’ and introduce ‘new issues that are of current interest and concern’ (Simon 1997: viii). These cover topics such as, for instance, empirical analyses, changing social values and modem technology.

Administrative Behavior planted the first seeds of the intellectual agenda that was to occupy Simon throughout a career in which he moved through (inter)disciplinary domains such as political science, administrative theory, economics, cognitive psychology and computer science. During these border crossings, Simon explored ‘the boundary between the rational and the non-rational aspects of human social behavior’ (Simon 1997: 118; also see Simon 1957: xxiv; 1976: xxviii). For Simon, ‘human behavior is intendedly rational, but only boundedly so’ (Simon 1997: 88; also see Simon 1957: xxiii- xxiv; 1976: xxviii). This is because there are limits to rationality due to, for example, unconscious skills, habits and reflexes, personal and social values, and bounds to accumulating, assimilating and applying knowledge (Simon 1997: 46-7).

Given their restricted rationality, individuals require the help of organizations to make their decisions. At the same time, the bounded rationality of the members that constitute an organization restricts its ability to achieve optimality in the pursuit of its goals. Simon therefore postulated that organizations set (moveable) targets and look for alternatives with which those goals can be met in a satisfactory manner. Using rules of thumb and attending to goals sequentially, Simon’s administrators consider only those solutions that will satisfy reasonable goals with as few complications as possible. According to Simon, human beings ‘satisfice because they have not the wits to maximize’ (Simon 1997: 118; also see Simon 1957: xxiv; 1976: xxviii).

The budding ideas contained in Administrative Behavior later blossomed into concepts such as satisficing, heuristics and goal-subgoal strategies that were to form the core of Simon’s intellectual activity.’ For Simon, the book served him ‘as a useful and reliable port of embarkation for voyages of discovery into human decision-making’ (Simon 1997: viii; also see Simon 1991: 86, 88).

Reviews of the first edition were plentiful and mostly positive, but, much to Simon’s disappointment, did not recognize it as the ‘revolutionary document’ he firmly believed it to be. In fact, ‘[the book created no sensation when it appeared’ (Simon 1991: 88). One of the exceptions, published more than a decade later, was an essay by Herbert Storing devoted to flaying Simon’s Administrative Behavior through observations such as: ‘[The result of [Simon’s] strenuous activities has been to leave the water a good deal muddier than it was before’ (Storing 1962: 150). Simon responded that the ‘Storing essays were such egregious examples of the practice of reading texts unsympathetically and without a genuine attempt to understand them that [he] never felt an urge to respond to them’ (Simon 1991: 63).

One reason for the ‘misperception’ on the part of the reviewers may be that Simon’s manuscript, though intended to be a move beyond the received organization theory, still lay within the classical tradition of observation, experience and reflection (Simon 1991: 59n). Despite his expressed feeling that systematic observation and experimentation were badly needed for organizational theory to become scientific, Simon relied on facts derived largely from commonsense observation and experience (Simon 1991: 73). His ‘excuse’ for depending mostly on his experience with the Milwaukee recreation research and the California tax incidence study was that a satisfactory theoretical framework was needed before the direction of empirical studies could be determined (Simon 1997: xi). To be sure, five decades after the publication of the original manuscript, Simon felt that his theory of bounded rationality ‘now rests, much more solidly than fifty years ago, on firm empirical foundations’ (Simon 1997: ix; also see Simon 1957: xxv; 1976: xxix-xxx).

Written for an audience of practical people, such as administrators and executives in business, government and education, and of academics, such as economists, political scientists, social psychologists, sociologists and cognitive psychologists, Administrative Behavior could ‘be described as a book for Every person’ (Simon 1997: viii).”et, much like the early reviewers, contemporary economists are likely to find themselves more confused concerning the ‘revolutionary’ aspects of Simon’s ‘heresy’ after having read the manuscript.

In keeping with his criticism of neoclassical economics, Simon sought to posit ‘administrative man’ in sharp contrast to ‘economic man’ (Simon 1957: xxv; 1976: xxx; 1997: 45).Whereas economic man maximizes, Simon’s administrative man satisfices. As a result, the latter’s choices do not follow from an examination of all possible alternatives and a determination that these are in fact all the alternatives. Whereas economic man deals with the ‘real world’ in all its complexities, Simon’s administrative man recognizes that the world he perceives is a drastically simplified model. Therefore, the latter’s decisions are made with relatively simple rules of thumb that do not make impossible demands on administrative man’s capacity for thought (Simon 1957: xxvi; 1976: xxx; 1997: 118-19).

At the same time, Administrative Behavior makes many advances to neoclassical economics. For example, it defines limited rationality ‘largely as a residual category’(Simon 1997:118; also see Simon 1957:xxiv-xxv; 1976: xxix); its characterization of the process of choice is ‘very incomplete’ (Simon 1997: 118; also see Simon 1957: xxiv-xxv; 1976: xxix); and it describes individuals’ choices among competing values by ‘a set of indifference curves’ (Simon 1997: 82). Hence, the self-proclaimed critic of neoclassical economics often ‘yielded too much ground to the omniscient rationality of economic man’ (Simon 1957: xxxv; also see Simon 1991: 270). In fact, Shafritz and Ott’s (1992) classification of the articles in their Classics of Organization Theory illustrates that they considered Simon’s work to be a contribution to the neoclassical theory of organization(Simon 1997:26-7). Even more, they contended that ‘Simon certainly was the most influential of the neoclassical organization theorists’ (Shafritz and Ott 1992: 98).4

Aware of his yielding ground to neoclassical economics, Simon issued the following apology: ‘At the time the first edition of Administrative Behavior was written, the model of economic man was far more completely and formally developed than the model of the satisficing administrator’ (Simon 1997:118; also see Simon 1957:xxiv-xxv; 1976:xxix).Furthermore,Simon observed, ‘[the social sciences suffer from acute schizophrenia in their treatment of rationality’ (Simon 1997: 87; also see Simon 1957: xxiii; 1976: xxvi-xxvii). At one extreme, economists attribute to economic man a ‘preposterously omniscient rationality’ (Simon 1997: 87). At the other extreme, social psychologists are caught up in trying to ‘reduce all cognition to affect’ (Simon 1997: 87). As a result, Simon ‘has sometimes been seen as overly rationalistic by behavioral students of human choice, and as overly behavioral by economists and other enthusiasts for rational models of human action’ (March 1978: 858).j Yet, the schizophrenia is exhibited in Simon’s own contributions as well. For instance, whereas Chapter IV places great emphasis on the rationality espoused by economists and formal decision theorists, Chapter V stresses the boundaries on rationality following from the limited cognitive capabilities embraced by social psychologists. This suggests that there may be a serious separation between Simon’s preaching and his practice.

In his commentary, Simon did lash out to recent developments in economics in a very eloquent manner that deserves extensive quotation:

Within the past generations, in its extension to competitive game situations (e.g., game theory) and to decision-making under uncertainty (e.g., rational expectations), this body of theory has reached a state of Thomistic refinement that has great intellectual and esthetic appeal but little discernible relation to the actual or possible behavior of flesh-and-blood human beings. (Simon 1997: 87)

Simon’s verdict on recent advances in the theory of the firm in general and new institutional economics in particular was only slightly less unforgiving, with, for instance, the business firm of economic theory described as ‘a pitifully skeletonized abstraction’ (Simon 1997: 20; also see Simon 1957: xxix; 1976:xxxii-xxxiii; 1991: 144,270-1; 1997:21,70-2,137-8, 160).6For Simon, these new developments were ‘diametrically opposed’ to his own (supposed) focus on the severe limitations of the decision-maker’s actual knowledge and computational powers in the face of the real world (Simon 1997: 122).In fact, Simon felt that game theory was partly to blame for the fact that mainstream economists were reluctant to accept his own theory of bounded rationality (Simon 1979: 5 0 3 4 ) . Furthermore, he believed that his former advisee, collaborator and colleague John Muth had explicitly labeled his theory ‘rational expectations’ in reply to Simon’s doctrine of bounded rationality (Simon 1991: 270-1).

In presenting Simon’s case to the Nobel Prize Committee, orthodox economists Baumol (1979) and Ando (1979) made little reference to Administrative Behavior.’ Whereas Baumol focused on the marginal in his discussion of Simon’s analysis of input-output processes, this ‘hardly represents the sort of breakthrough that would warrant a Nobel Prize’ (Cicarelli and Cicarelli 1989: 270). At the same time, Ando focused on the obscure in describing several of Simon’s ‘minor’ contributions that have some significance to mainstream economics but are only tangential to the true meaning of Simon’s work. Though Ando observed in a footnote that most economists are likely to find Simon’s analysis of bounded rationality somewhat remote from their everyday concern, ‘[ilt was these and other equally “remote” results that earned Simon his Nobel Prize’ (Cicarelli and Cicarelli 1989: 271). Yet, it remains Simon’s hope that Administrative Behavior, ‘augmented by the commentaries, will continue to help those who would like to understand better and manage more effectively . . . complex social systems, the organizations in which we do our business’ (Simon 1997: x). Though this hope may be fulfilled, an understanding of Simon’s ‘heresy’ remains elusive.

NOTES

  1. In the 1997 edition of Administrative Behavior, Simon included a discussion on satisficing in his commentary on Chapter V. However, the concept was not part of the original text.

  2. Note Simon’s gender-neutral phrasing here. This is discussed further in the following note.

  3. In his introduction to the fourth edition, Simon issued the following apology: ‘The original text of Administrative Behavior was written, of course, long before the norm of gender-neutral writing was established, and it sins egregiously in its almost exclusive use of masculine pronouns’ (Simon 1997: x).

  4. It should be noted that there may be linguistic confusion stemming from the fact that different people use dissimilar interpretations of the adjectives ‘classical’ and ‘neoclassical’.

  5. March’s observation is echoed by Simon: ‘On the one side, classical economists resisted the adjective in the phrase “bounded rationality” . . . On the other side, non-quantitative students of management resisted the noun “rationality”’ (Simon 1997: 331).

  6. It ought to be mentioned that Institutional Economics by the ‘old’ institutional economist John R. Commons may have been a source for Simon’s ‘various conceptions of rationality that deviate from the economists’ maximization of subjective expected utility’ (Simon 1991: 87).

  7. However, as mentioned earlier, the Nobel Committee singled out Administrative Behavior when it presented Simon with the Prize.

REFERENCES

  • Ando, Albert (1979) ‘On the contributions of Herbert A. Simon to economics’, Scandinavian Journal of Economics 81(1): 83-93.
  • Barnard, Chester I. (1938) The Functions of the Executive, Cambridge, Mass.: Harvard University Press.
  • Baumol, William J. (1979) ‘On the contributions of Herbert A. Simon to economics’, Scandinavian Journal of Economics 81(1): 74-82.
  • Carlson, Sune (1992) ‘Presentation: The prize for economic science, in memory of Alfred Nobel’, in Assar Lindbeck (ed.) Economic Sciences, 1969-1980, Singapore: World Scientific, pp. 335-6.
  • Cicarelli, James and Cicarelli, Julianne (1989) ‘Herbert Alexander Simon’, in Bernard S. Katz (ed.) Nobel Laureates in Economic Sciences: A Biographical Dictionary, New York: Garland, pp. 264-76.
  • March, James G. (1978) ‘The 1978 Nobel Prize in Economics’, Science 24 November: 858-61.
  • Shafritz, Jay M. and Ott, J. Steven (eds) (1992) Classics of Organization Theory, 3rd edn, Belmont, Calif.: Wadsworth.
  • Simon, Herbert A. (1947) Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations, 1st edn, New York: Macmillan.
    • (1957) Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations, 2nd edn, New York: Macmillan.
    • (1976) Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations, 3rd edn, New York: Free Press.
    • (1979) ‘Rational decision making in business organizations’, American Economic Review 69(4): 493-5 13.
    • (1991) Models ofMy Life, New York: Basic Books.
    • (1997) Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations, 4th edn, New York: Free Press. -Storing, Herbert J. (1962) ‘The science of administration: Herbert A. Simon’, in Herbert J. Storing (ed.) Essays on the Scientific Study of Politics, New York: Holt, Rinehart and Winston.

Esther-Mirjam Sent University of Notre Dame

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