ways of being rational

In my experience of guiding students through this exercise, it turns out to be quite difficult. So let me start out with a (very short) example what I expect, and along the way point out some of the mistakes that can happen. A general point to remember (also for other assignments): using a theory should always enable you to see, understand or explain something that otherwise remains unclear. If the theory does not do that, then either you have chosen the wrong theory, or your application is not yet completely developed. For this assignment, explaining a decision with the rational actor model (RA) and the bounded rationality model (BR) should help you to understand why the organization of your choice may have come to that decision or action.

A first mistake that is quite costly is not properly delineating the decision or action you are analyzing. Some of you have a good topic, but fail to choose a single decision as aunit of analysis. Instead, you analyze a set of decisions, or the decisions of two (or more) organizations interacting. This means you are doing too much work, and it becomes more complicated because you have to disentangle the various decisions involved.

The decision I will use as an example is the decision of the municipality of Wieringermeer, in the North of the Netherlands, to allow only existing owners of wind turbines to place new turbines. Note that I choose one decision of the municipality, not the complex of decisions surrounding it (the decisions of new parties; possible opponents to the decision, etc.)

A second step in the assignment is that you specify the core elements of the theory that you are going to use.. The theories can be found in the lecture sheets, and for BR in the article of Jones as well. Be careful with the BR theory; it has a version for individuals and one for organizations. Also, you can use the principles, or the list of processes (which I also presented during the lecture). Some of you use the individual variant to analyze an organization (or vice versa). While organizations consist of individuals, the core idea of the Jones-article is that at the organizational level there are distinct processes that are the cause for boundedly rational decisions.

The decision of the municipality can be the outcome of a process of rational decision-making because of a specific set of beliefs that are based in an optimal gathering of information. In this case, the municipality might have assessed all parties that have expressed interest in building a wind turbine. These might have been found to come from outside the local community. Based on a thorough assessment of previous experiences, the municipality has a preference for local investors, because they are accepted by the community, and in return there is little contestation of the building of wind turbines. Thus, rather than allowing new parties to build, the municipality has decided to allow existing owners of wind turbine to place additional or substituting existing turbines.

The RA is often the easiest to apply, because (as we discussed in class) organizations tend to rationalize their decisions as part of the process of defending them. The reasons they then provide (in the media) very often come close to an application of the RA model.

The decision of the municipality could also be a result from processes related to BR. One of such processes is the operation of routines. In trying to get more wind turbines within the municipality, the responsible department has talked about additional wind turbines with the ‘usual suspects’, the existing owners with whom they regularly discuss (= routine) the development of wind energy. When the deadline for new permits (= routine) passed, it turned out that only the existing owners applied; this may be a result that other parties simply didn’t know about the opportunity!

This example makes clear that with some additional information or informed speculation, you can develop one or more of the processes of BR into an explanation of your decision. Please note that you do not have to have all processes listed by Jones in your storyline: only one of them is enough to cause bounded rationality. In a full analysis though, you have to take the list and at least mention which ones are likely to occur, and which ones will not. 

Hopefully this example helps you in improving your entry if you wish to do so.