Bounded Rationality

People make reasonable decisions based on the limited, often delayed information available from their position in a system, not on perfect global knowledge. Rational local choices can still add up to poor system-wide outcomes.

Why it Matters

It explains why competent, well-intentioned actors produce bad collective results: the cause is the information and incentives their position exposes them to, not their character. The fix is to change the structure, not to replace the people.

Signals

• "Anyone sitting in that seat would do the same thing."
• Outcomes blamed on individuals when the structure is driving the behavior.
• Actors making decisions with no visibility into the whole.

Benefits

Directs fixes at information flows and incentives rather than at blame, and lets you predict behavior from where someone sits in the system.

Risks

Assuming you would do better in their place when you usually would not; replacing people while leaving the structure that reproduces the same behavior untouched.

Tensions

Accountability versus structure: holding individuals responsible feels just, but it often misdiagnoses a structural cause and leaves the real driver in place.

Examples

Each fisher rationally taking more fish until the shared stock collapses; a manager optimizing a local metric in a way that harms the overall flow. Nudge frames the same limit as "Humans" versus "Econs": real people are not the perfectly rational agents economic models assume, so policies and products should be designed for Humans.