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 Choice Theory

    An economic principle that assumes that individuals always make ...
  2. Rationing

    The artificial restriction of raw materials, goods or services. ...
  3. Nobel Memorial Prize In Economic ...

    A prestigious award acknowledging outstanding contributions to ...
  4. Rational Expectations Theory

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

    An American neoclassical economist who won the Nobel Memorial ...
  6. Ronald H. Coase

    A British economist who won the 1991 Nobel Memorial Prize in ...
Related Articles
  1. Investing News

    Jim Simons' Success Story: Net Worth, Education & Top Quotes

    Learn about the billionaire "Quant King," James Simons, and how the award-winning mathematician built his highly successful trading career.
  2. Fundamental Analysis

    Top 5 Positions in Jim Simon's Portfolio

    Learn about the five largest positions in quant king Jim Simons' portfolio and the number of shares of common stock that he owns in each of these five companies.
  3. Investing News

    Jim Simons' 5 Best High-Dividend Stock Picks in 2016

    Find out which high-yielding dividend stocks are among the largest positions in "Quant King" Jim Simons' massive equities portfolio.
  4. Term

    Understanding Rational Choice Theory

    Rational choice theory assumes an individual will always make prudent and logical decisions that yield the most benefits.
  5. Investing Basics

    Explaining Rational Behavior

    Rational behavior guides the decision-making process toward choices that maximize an individual’s benefit.
  6. Investing Basics

    Modern Portfolio Theory vs. Behavioral Finance

    Modern portfolio theory and behavioral finance represent differing schools of thought that attempt to explain investor behavior. Perhaps the easiest way to think about their arguments and positions ...
  7. Investing News

    Jim Simons: Justifying a 5% Management Fee

    Find out how Jim Simons of Renaissance Technologies is able to justify a 5% management fee at a time when many hedge funds are cutting their fees.
  8. Forex Education

    5 Reasons To Avoid Index Funds

    Index funds are an easy way to gain access to the financial markets, but here are five reasons why they may not be right for you.
  9. Personal Finance

    Microeconomics: A Brief History

    by Marc DavisAs early as the 18th century, economists were studying the decision-making processes of consumers, a principal concern of microeconomics. Swiss mathematician Nicholas Bernoulli (1695-1726) ...
  10. Active Trading Fundamentals

    Behavioral Finance: Background

    By Albert PhungBefore we go over the specific concepts behind behavioral finance, let's take a more general look at this branch of finance. In this section, we'll examine how it compares to conventional ...
RELATED FAQS
  1. Is economics a science?

    Learn how economics fits into the category of social sciences, and discover the arguments critics make against this classification. Read Answer >>
  2. What does the Efficient Market Hypothesis have to say about fundamental analysis?

    Find out what the efficient markets hypothesis has to say about fundamental analysis and how recent finance research has ... Read Answer >>
  3. What are the differences between weak, strong and semi-strong versions of the Efficient ...

    Discover how the efficient market theory is broken down into three versions, the hallmarks of each and the anomalies that ... Read Answer >>
  4. What is the homo economicus?

    Homo economicus or "economic man" is the characterization of man in some economic theories as a rational person who pursues ... Read Answer >>
  5. Has the Efficient Market Hypothesis been proven correct or incorrect?

    Explore the efficient market hypothesis and understand the extent to which this theory and its conclusions are correct or ... Read Answer >>
  6. Are perfect competition models in economics useful?

    Take a look at some of the arguments made by the proponents and critics of the theory of perfect competition in contemporary ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center