Bounded Rationality in Trading Zones: Simon, Williamson, North, and the Missed Integration of Behavioral and Institutional Economics

This paper reconstructs the postwar trajectory of bounded rationality through a triangulated analysis of Herbert A. Simon, Oliver E. Williamson, and Douglass C. North. Rather than treating their intellectual relationships as matters of doctrinal or semantic convergence or divergence, I examine them as disciplinary trading zones where scientific arguments were pragmatically translated, contested, or adapted. Within these exchanges, bounded rationality emerged as a canonical reference point through which scientific debates were framed and interdisciplinary borrowings were negotiated, but it did not consolidate into a unified behavioral-institutional science of economics that the three thinkers, in different ways, sought to advance. In the Simon–Williamson exchange, bounded rationality became a focal point for negotiating what counted as adequate behavioral grounding in microeconomic theory, producing partial convergence on its scientific plausibility but a durable divergence over methodological legitimacy. In North’s later appropriation of Simonian themes, by contrast, bounded rationality entered a differently configured trading zone: less as a contested micro-foundational requirement than as an adaptive resource for linking cognition, behavior, and institutional change. Across these cases, efforts to integrate behavioral analysis into economic theory generated normative spillovers that could be managed only through provisional, methodologically situated solutions. The incomplete integration of bounded rationality, I argue, was therefore not simply a failure of ambitious scientific synthesis, but reflected the contingent dynamics through which Simon, Williamson, and North sought to reconfigure some most foundational questions of late twentieth-century economic thought.