Carnegie School

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The Carnegie School is a school of economic thought formed at the Graduate School of Industrial Administration of Carnegie Institute of Technology (CIT), the current Carnegie Mellon University. It is known for formulating two "seemingly incompatible" concepts: bounded rationality and rational expectations. The former was developed by Herbert A. Simon, along with James March, Richard Cyert and Oliver Williamson. The latter was developed by John F. Muth and later popularized by Robert Lucas Jr., Thomas Sargent, and others. [1] [2]



The Graduate School of Industrial Administration (GSIA) was founded in the late 1940s, after receiving a grant by William Larimer Mellon Sr. to enable graduate instruction in business and economics for the engineers the university already produced. The founding dean was [George Leland Bach]], and among the first faculty hires were William W. Cooper and Herbert A. Simon. Other early appointees included Abraham Charnes, Richard Cyert, James G. March, Franco Modigliani and Merton Miller.

GSIA was set up as a "new look" business school, moving beyond the case-based method of instruction popularized by Harvard Business School to incorporate scientific methods of management. Simon and the frequent collaborators Charnes and Cooper received the John von Neumann Theory Prize for their pioneering contributions to operations research and management science.

The focus of the research was on organizational behavior and the application of decision analysis, management science, and psychology as well as theories such as bounded rationality to the understanding of the organization and the firm.

Highly influential works done by researchers at the Carnegie School include:

The interdisciplinary approach featured faculty at Carnegie Mellon's modern departments of economics, business, public policy, computer science, psychology, statistics and data science, and social and decision sciences.

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Herbert A. Simon American political scientist, economist, sociologist, and psychologist

Herbert Alexander Simon was an American political scientist, with a Ph.D. in political science, whose work also influenced the fields of computer science, economics, and cognitive psychology. His primary research interest was decision-making within organizations and he is best known for the theories of "bounded rationality" and "satisficing". He received the Nobel Memorial Prize in Economic Sciences in 1978 and the Turing Award in computer science in 1975. His research was noted for its interdisciplinary nature and spanned across the fields of cognitive science, computer science, public administration, management, and political science. He was at Carnegie Mellon University for most of his career, from 1949 to 2001.

Carnegie Mellon University Private university in Pittsburgh, Pennsylvania

Carnegie Mellon University (CMU) is a private research university based in Pittsburgh, Pennsylvania. Founded in 1900, the university is the result of a merger of the Carnegie Institute of Technology and the Mellon Institute of Industrial Research. Established by Andrew Carnegie as the Carnegie Technical Schools, the university became the Carnegie Institute of Technology in 1912 and began granting four-year degrees. In 1967, the Carnegie Institute of Technology merged with the Mellon Institute of Industrial Research, formerly a part of the University of Pittsburgh. Since then, the university has operated as a single institution.

Bounded rationality is the idea that rationality is limited when individuals make decisions. In other words, humans' "preferences are determined by changes in outcomes relative to a certain reference level". in which lower reference level resulted in lower preferences of the outcome relative to higher and better reference level. When the decision was made, the outcome will be considered as “satisfied” or “rational” regardless whether the decision is optimal or not because the preferences was referred to it most peak level or the initial situation force the agent to do so. Due to this limitations, an agent would not possible to reach an optimum level of outcome from the decision making.

Oliver E. Williamson American economist

Oliver Eaton Williamson was an American economist, a professor at the University of California, Berkeley, and recipient of the 2009 Nobel Memorial Prize in Economic Sciences, which he shared with Elinor Ostrom.

Heinz College

The Heinz College of Information Systems and Public Policy at Carnegie Mellon University in Pittsburgh, Pennsylvania, United States is a private graduate college that consists of one of the nation's top-ranked public policy schools—the Network of Schools of Public Policy, Affairs, and Administration-accredited School of Public Policy & Management—and information schools—the School of Information Systems & Management. It is named for the late United States Senator H. John Heinz III (1938-1991) from Pennsylvania. The Heinz College is also a member of the Institute for Information Infrastructure Protection, one of 24 members of the iCaucus leadership of iSchools, and a founding member of the MetroLab Network, a national smart city initiative and New America's Public Interest Technology University Network.

Carnegie Mellon School of Computer Science School for computer science in the United States

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Allen Newell American cognitive scientist

Allen Newell was a researcher in computer science and cognitive psychology at the RAND Corporation and at Carnegie Mellon University’s School of Computer Science, Tepper School of Business, and Department of Psychology. He contributed to the Information Processing Language (1956) and two of the earliest AI programs, the Logic Theory Machine (1956) and the General Problem Solver (1957). He was awarded the ACM's A.M. Turing Award along with Herbert A. Simon in 1975 for their basic contributions to artificial intelligence and the psychology of human cognition.

James G. March

James Gardner March was an American political scientist, sociologist, and economist. A professor at Stanford University in the Stanford Graduate School of Business and Stanford Graduate School of Education, he is best known for his research on organizations, his seminal work on A Behavioral Theory of the Firm, and the organizational decision making model known as the Garbage Can Model.

The Department of Social and Decision Sciences (SDS) is an interdisciplinary academic department within the Dietrich College of Humanities and Social Sciences at Carnegie Mellon University. The Department of Social and Decision Sciences is headquartered in Porter Hall in Pittsburgh, Pennsylvania and is led by Department Head Gretchen Chapman. SDS has a world-class reputation for research and education programs in decision-making in public policy, economics, management, and the behavioral social sciences.

William H. Starbuck

William Haynes Starbuck graduated from Harvard University and the Carnegie Institute of Technology. He is an organizational scientist who has held professorships in social relations, sociology, business administration, and management.

Richard Michael Cyert was an American economist, statistician and organizational theorist, who served as the sixth President of Carnegie Mellon University in Pittsburgh, Pennsylvania, United States. He is known for his seminal 1959 work "A behavioral theory of the firm," co-authored with James G. March.

David Klahr American psychologist (born 1939)

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The Tepper School of Business is the business school of Carnegie Mellon University. It is located in the university's 140-acre (0.57 km2) campus in Pittsburgh, Pennsylvania, US.

A Behavioral Theory of the Firm Book by Richard Cyert

The behavioral theory of the firm first appeared in the 1963 book A Behavioral Theory of the Firm by Richard M. Cyert and James G. March. The work on the behavioral theory started in 1952 when March, a political scientist, joined Carnegie Mellon University, where Cyert was an economist.

<i>Administrative Behavior</i>

Administrative Behavior: a Study of Decision-Making Processes in Administrative Organization is a book written by Herbert A. Simon (1916–2001). It asserts that "decision-making is the heart of administration, and that the vocabulary of administrative theory must be derived from the logic and psychology of human choice", and it attempts to describe administrative organizations "in a way that will provide the basis for scientific analysis". The first edition was published in 1947; the second, in 1957; the third, in 1976; and the fourth, in 1997. As summarized in a 2001 obituary of Simon, the book "reject[ed] the notion of an omniscient 'economic man' capable of making decisions that bring the greatest benefit possible and substitut[ed] instead the idea of 'administrative man' who 'satisfices—looks for a course of action that is satisfactory'". Administrative Behavior laid the foundation for the economic movement known as the Carnegie School.

William Wager Cooper was an American operations researcher, known as a father of management science and as "Mr. Linear Programming". He was the founding president of The Institute of Management Sciences, founding editor-in-chief of Auditing: A Journal of Practice and Theory, a founding faculty member of the Graduate School of Industrial Administration at the Carnegie Institute of Technology, founding dean of the School of Urban and Public Affairs at CMU, the former Arthur Lowes Dickinson Professor of Accounting at Harvard University, and the Foster Parker Professor Emeritus of Management, Finance and Accounting at the University of Texas at Austin.

Paul S. Goodman (1937–2012) was an organizational psychologist, author, and filmmaker. He was the Richard M. Cyert Professor of Organizational Psychology at Carnegie Mellon University's Tepper School of Business.

Behavioral strategy refers to the application of insights from psychology and behavioral economics to the research and practice of strategic management. In one definition of the field, "Behavioral strategy merges cognitive and social psychology with strategic management theory and practice. Behavioral strategy aims to bring realistic assumptions about human cognition, emotions, and social behavior to the strategic management of organizations and, thereby, to enrich strategy theory, empirical research, and real-world practice".

Linda Argote is an American academic specializing in industrial and organizational psychology. She is Thomas Lord Professor of Organizational Behavior and Theory in the Tepper School of Business at Carnegie Mellon University, where she directs the Center of Organizational Learning, Innovation and Knowledge.


  1. Raymond Augustine Bauer, Kenneth J. Gergen (1968). The study of policy formation. National Planning Association. p.115.
  2. Jens Beckert, Milan Zafirovski (2006). International encyclopedia of economic sociology. p.48
  3. Anderson, Marc H.; Lemken, Russell K. (2019). "An Empirical Assessment of the Influence of March and Simon's Organizations: The Realized Contribution and Unfulfilled Promise of a Masterpiece". Journal of Management Studies. 56 (8): 1537–1569. doi:10.1111/joms.12527. ISSN   1467-6486.