Herbert A. Simon

DEFINITION of 'Herbert A. Simon'

An American economist and social scientist who won the Nobel Memorial Prize in Economics in 1978 for his contributions to modern business economics. Herbert Alexander Simon's theory of bounded rationality says that individuals do not make perfectly rational decisions because of the difficulty of obtaining all the information needed to do so.

BREAKING DOWN 'Herbert A. Simon'

Simon was born in 1916 in Milwaukee and died in 2001. He earned his Ph.D. from the University of Chicago and taught computer science and psychology at Carnegie Mellon University. His research also focused on artificial intelligence and computer technology. The efficient market hypothesis centers around how much information an investor has to make a decision.

RELATED TERMS
  1. Rational Behavior

    A decision-making process that is based on making choices that ...
  2. Economist

    An expert who studies the relationship between a society's resources ...
  3. Rational Expectations Theory

    An economic idea that the people in the economy make choices ...
  4. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  5. Economics

    A social science that studies how individuals, governments, firms ...
  6. Neuroeconomics

    Neuroeconomics attempts to connect economics, psychology and ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Economics

    Adam Smith: The Father Of Economics

    This free thinker promoted free trade at a time when governments controlled most commercial interests.
  3. Fundamental Analysis

    4 Misconceptions About Free Markets

    These fallacies have hounded free market economists since the days of Adam Smith.
  4. Economics

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  5. Options & Futures

    Why Wages Stick When The Economy Shifts

    Even economists can't agree on the impact (or even existence) of wage stickiness. So, how does it affect you?
  6. Forex Education

    Free Market Maven: Milton Friedman

    As proponent of free market capitalism, this economist changed the way the world's economies operate.
  7. Active Trading

    Giants Of Finance: John Maynard Keynes

    This rock star of economics advocated government intervention at a time of free-market thinking.
  8. Term

    Three Ways to Profit Using Call Options

    A call option gives an investor the right, but not the obligation, to buy a stock at a specific price, known as the strike price.
  9. Term

    Understanding Rational Choice Theory

    Rational choice theory assumes an individual will always make prudent and logical decisions that yield the most benefits.
  10. Active Trading Fundamentals

    New Traders: Trade the Market in 5 Steps

    New traders shouldn’t throw money at securities without knowing why prices move. Follow these five steps to tilt the odds in your favor.
RELATED FAQS
  1. How do mutual funds split?

    Mutual funds split in the same way that individual stocks split, but less often. Like a stock split, mutual fund splits do ... Read Full Answer >>
  2. According to the neoclassical growth theory, what factors influence the growth of ...

    The neoclassical growth theory builds five major variables into its time-sensitive production formula. The first is total ... Read Full Answer >>
  3. What industries are typically considered infant industries?

    Infant industries are those considered vulnerable to established competitors. Some examples of infant industries include ... Read Full Answer >>
  4. How is game theory related to the Nash equilibrium?

    The Nash equilibrium is an important concept in game theory referring to a stable state in a game where no player can gain ... Read Full Answer >>
  5. How can individuals or businesses handle transaction costs for economic externalities?

    Externalities, also known as external economies, and transaction costs are two significant and evolving issues in contemporary ... Read Full Answer >>
  6. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center