Herbert A. Simon

AAA

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.

INVESTOPEDIA EXPLAINS '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. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  4. Rational Expectations Theory

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

    A social science that studies how individuals, governments, firms ...
  6. Head-Fake Trade

    A trade where a stock or market appears to be making a move in ...
RELATED FAQS
  1. How is the 80-20 rule (Pareto Principle) used in management?

    The 80-20 rule, also known as the Pareto principle, is meant to express a philosophy about identifying inputs. It is not ... Read Full Answer >>
  2. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>
  3. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  4. How is a market failure prevented with regard to public goods?

    It was once commonly accepted that any public good constituted a market failure and provided necessary and sufficient conditions ... Read Full Answer >>
  5. What does it mean to be absolutely risk averse?

    Some people are absolutely risk-averse, which means that they cannot tolerate sustaining any sort of loss, even a temporary ... Read Full Answer >>
  6. Can the Efficient Market Hypothesis explain economic bubbles?

    The efficient market hypothesis (EMH) cannot explain economic bubbles because, strictly speaking, the EMH would argue that ... Read Full Answer >>
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. Investing Basics

    How To Outperform Warren Buffett Using Market Simulators

    That moment when you realize you just booked $108 million dollars in less than an hour: it puts butterflies in your stomach.
  9. Mutual Funds & ETFs

    Invest in Emerging Market Currencies with this ETF

    Why this emerging market currency ETF needs to be on your radar.
  10. Chart Advisor

    Buying Opportunities on Upside Wedge Breakouts

    Find buying opportunities in these stocks, which have seen their prices break out of long-term declining wedge patterns.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center