On the Contributions of Herbert A. Simon to Economics

Abstract

Herbert Simon has made a number of profound contributions to economic analysis and its applications. Both in depth and in volume his work is remarkable, and this is all the more extraordinary since economics is not his primary field. His work is used constantly in the economic literature. His writings on human rationality have given rise to a new school of investigation, the behavioral study of firms and other organizations-a school which has produced a number of important books and articles. His contributions to mathematical economics include a theorem (about which more will be said later) that continues to serve as a key element in areas as diverse as input-output analysis, comparative statics and its relations to dynamics and the modern interpretation of the Ricardian and Marxian models. He has also made contributions in a variety of other areas, such as the theory of causal ordering and the analysis of the identification problem in econometrics. He has published applied econometric studies relating to organizational behavior. He has written a number of significant reports on important economic issues in public policy. He has also contributed to the foundation of the new field of operations research (management science) which consists, to a considerable extent , in the adaptation of the more rigorous tools of economic analysis to the analysis of governmental and business decisions, that is, into means for more effective decision making. Simon's productivity has continued undiminished throughout his career (which still has a long time to go!). His recent publications continue to add to his earlier work along lines of natural development. This review will be devoted primarily to a discussion of Simon's two most crucial contributions to economics. Wherever possible, his most recent work will be noted.