Bounded Rationality

Bounded rationality- The logic that leads to decisions or actions that make sense within one part of a system but are not reasonable within a broader context or when seen as part of a larger system.

In layman's terms bounded rationality is doing the best with what you got. It becomes very difficult to take into account all the externalities that comprise a system and be able to predict the waves that your decision will make. I especially like an example Donella Meadows used in her book. She referred to a fisherman overfishing his fishery and basically ruining his livelihood. Although it is ridiculous to think it was the one fisherman who caused the downfall of the fishery, it is externalities such as other fisherman's bounty that helped lead to the downfall. The fisherman did not have access to the information and thus was doing the best he knew how. Donella states "The bounded rationality of each actor in a system may not lead to decisions that further the welfare of a system as a a whole."