theories of decision-making in economics and behavioural science by herbert a. simon recent years have seen important new explorations at the boundaries between economics and psychology. for the economist, the question is whether these developments include new advances in psychology that can be applied to economics. for the psychologist, the question is whether developments in economic theory have implications for psychology. if economics can find verifiable generalisations about human economic behaviour, these generalisations must be included in broader theories of human behaviour. influence will run both ways. economics has traditionally focused on normative macroeconomics, which aims to guide decisions at the level of public policy. descriptive macroeconomics provides the scientific base for policy prescription, but research has been largely determined by relevance to policy, such as business cycle theory. normative microeconomics, often called "management science," "engineering economics," and "operations research," is a flourishing area of work with an uneasy relationship to economics. much of this work is done by mathematicians, statisticians, engineers, and physical scientists. this new area, like the old, is normative in orientation. economists have been relatively uninterested in descriptive microeconomics, except as it provides a foundation for macroeconomics. the normative microeconomist is concerned with how people ought to behave, not how they do. the macroeconomist assumes that economic actors are rational and makes strong predictions about human behaviour without observing people. he often assumes competition, implying only the rational survive. classical economic theory of markets with perfect competition and rational agents is deductive and requires little contact with empirical data. undoubtedly, there is an area of human behaviour that fits these assumptions reasonably well, where classical theory is a powerful tool. however, it fails to include some central problems of conflict and dynamics. a metaphor illustrates this failure. if we were pouring viscous liquid into a bowl of irregular shape, what would we need to know about the properties of the liquid to predict its behaviour?theories of decision-making in economics and behavioural science by herbert a. simon recent years have seen important new explorations at the boundaries between economics and psychology. for the economist, the question is whether these developments include new advances in psychology that can be applied to economics. for the psychologist, the question is whether developments in economic theory have implications for psychology. if economics can find verifiable generalisations about human economic behaviour, these generalisations must be included in broader theories of human behaviour. influence will run both ways. economics has traditionally focused on normative macroeconomics, which aims to guide decisions at the level of public policy. descriptive macroeconomics provides the scientific base for policy prescription, but research has been largely determined by relevance to policy, such as business cycle theory. normative microeconomics, often called "management science," "engineering economics," and "operations research," is a flourishing area of work with an uneasy relationship to economics. much of this work is done by mathematicians, statisticians, engineers, and physical scientists. this new area, like the old, is normative in orientation. economists have been relatively uninterested in descriptive microeconomics, except as it provides a foundation for macroeconomics. the normative microeconomist is concerned with how people ought to behave, not how they do. the macroeconomist assumes that economic actors are rational and makes strong predictions about human behaviour without observing people. he often assumes competition, implying only the rational survive. classical economic theory of markets with perfect competition and rational agents is deductive and requires little contact with empirical data. undoubtedly, there is an area of human behaviour that fits these assumptions reasonably well, where classical theory is a powerful tool. however, it fails to include some central problems of conflict and dynamics. a metaphor illustrates this failure. if we were pouring viscous liquid into a bowl of irregular shape, what would we need to know about the properties of the liquid to predict its behaviour?