Decision Doctor

The 78 Nobel winner examines management

One of the few geniuses in the social sciences," says Harvard Economist Otto Eckstein. 'The one man in the world who has come closest to being a Renaissance man," opines Richard Cyert, president of Pittsburgh's Carnegie-Mellon University (CMU). These were some of the reactions to the surprise award last week of the 1978 Nobel Prize for Economics to Herbert A. Simon, 62, a professor of psychology and computer science at CMU. Choosing Simon may be an attempt by the Nobel committee to broaden the basis for the economics prize, which has come under muted criticism for being too narrowly focused; some economists believe the prize should be expanded to include outstanding work in all the social sciences.

Despite his groundbreaking theories on business decision making, Simon, who has made important contributions to a variety of fields from sociology to applied mathematics, is not an orthodox economist. Moreover, the centerpiece of his economic work, the widely influential book Administrative Behavior, which was cited by the Nobel committee, was published more than 30 years ago.

Simon's ideas punch holes in the traditional theory that corporations seek to achieve the very maximum profits and, in striving toward this goal, automatically adjust to changing circumstances. In the modern corporation, he contends, decision making is diffuse, spreading through many departments and individuals, not always harmoniously.

Corporate policymakers, Simon asserts, are pressed to make decisions without enough accurate information to maximize profits. They settle for aiming at merely "satisfactory" profits, often with unexpected results. A key weakness in the haphazard process is that solutions that worked once may be tried over and over again in situations requiring entirely different resolutions. Most economic forecasters, however, accept the traditional notion that firms seek to maximize profits. If that is not so, then the economic policy decisions that flow from their forecasts, both in and out of government, are to say the least, questionable.

Simon was brought up in Milwaukee and earned his doctorate in political science from the University of Chicago in 1943. For the past two decades he has been a leader in the drive to create artificial intelligence through computer technology. Says he: "My mind works according to laws and mechanisms, not some mysterious mind fluid." In his 29 years at CMU, Simon has proved a talented administrator and teacher. A painter and pianist, Simon also served on the President's Science Advisory Committee under Lyndon Johnson.

Simon is determined not to let the luster of the prize change his life. On entering his first class the day after the Nobel announcement, Simon was greeted with a standing ovation from his jubilant students. He smiled, thanked them, and without further ado went into his lecture on cognitive psychology.

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