Herbert Simon discussed the issue in his pre-AI work. In contrast to the assumption of rational choice in classical economics, Simon describes a range of cognitive limitations that make fully rational decision-making in organizations impracticable. Yet organizations thrive anyway, he argues, because they provide each individual with a structured environment that ensures that their decisions are good enough. The division of labor, for example, compensates for the individual's limited ability to master a range of tasks. Structured flows of information, likewise, compensate for the individual's limited ability to seek this information out and judge its relevance.
Hierarchy compensates for the individual's limited capacity to choose goals.
And fixed procedures compensate for individuals' limited capacity to construct procedures for themselves. In comparison to Simon's early theory in Administrative Behavior , AI has downplayed the distinction between agent and environment. This is clearly a good way of modeling tasks such as logical theorem-proving and chess, in which the objects being manipulated are purely formal. For tasks that involve activities in the physical world, however, the picture is more complex. In such cases, the problem solving model analyzes the world in a distinctive way.