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Rational Actor

Rational Actor. Lecture 4. McFarland Lectures. General introduction and discussion of decision-making in organizations . Leaders often engage in organizational decision making. In this lecture we will discuss two models of decision-making and how people actually implement them.

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Rational Actor

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  1. Rational Actor Lecture 4 McFarland Lectures

  2. General introduction and discussion of decision-making in organizations Leaders often engage in organizational decision making. In this lecture we will discuss two models of decision-making and how people actually implement them. McFarland Lectures

  3. Rational Actor Approach • Models of Rational Action • Logic of Consequence: choices and instrumental efforts. • Logic of Appropriateness: rule-following and interpretive activity. McFarland Lectures

  4. Logic of Consequence – Rational Choice in Action • Knowing alternatives – what are the options? • Knowing the consequences of these alternatives – What happens if I take an option? • Having ordered preferences (ranked goals and objectives in terms of greater or lesser value). McFarland Lectures

  5. Logic of Consequence • Using a decision rule, or choice process – rule by which an alternative is selected on the basis of its consequences for preferences (goals). Two decision rules are commonly discussed and reflect different notions of a rational actor: • An ideally rational person (traditionally called “economic man” by critics) who is typified by clarity in knowing and consistency of preferences/objectives. • A boundedly rational person typified by ambiguity (and uncertainty) in knowing (incomplete info) and inconsistency in preferences/ objectives (unstable, vague, etc.) McFarland Lectures

  6. EU=-4.0 Rain (0.4) Net Expected Utility = -.4 Don’t Bring Umbrella No Rain (0.6) EU=3.6 EU=3.2 Rain (0.4) Bring Umbrella Net Expected Utility = 0.6 No Rain (0.6) McFarland Lectures EU=-3.0

  7. EU= -0.8 Accept (0.1) Net Expected Utility = 1 Don’t Ask Out Reject (0.9) EU= 1.8 EU= 1.0 Accept (0.1) Ask Out Net Expected Utility = -8 Reject (0.9) EU= -9.0 Ambiguity or uncertainty about consequences and costs?

  8. Logic of Consequence–Bounded Rationality in Action • Satisficing (Simon 1947): a decision making strategy that attempts to meet an acceptability threshold. • Why? We are boundedly rational: we often lack the time to consider every alternative, or we lack cognitive capacity to optimize (ambiguity, lack of precision, unreliable perceptions, etc). • Dating example again: We now choose from 10 people and only consider the expected utility of asking them all and them saying yes. And we decide as soon as we reach someone above an expected utility threshold of say 3. Threshold A Order of Choices EU= -10 B EU= -4 C EU= -5 Point of Choice D EU= 3.0 E EU= -10 F EU= 0 G EU= -1 H EU=9.5 J EU= 10 I EU= 3.3 McFarland Lectures

  9. Logic of Appropriateness – Rule-Following in Action • Situations are classified into categories associated with rules and identities (roles). What kind of problem is it? Who usually addresses it? How has it been addressed in the past? • Decision makers have official identities and roles that are evoked in particular situations. • Decision makers match rules and identities to kinds of situations (this is an x situation for y people to manage – Inference pattern is a matching one. See Allison’s “organizational process”, less identical though). One notices rule-following and the logic of appropriateness being used in organizational decisions whenever people follow traditions, hunches, cultural norms, advice of others, pre-existent rules and standard procedures, and heuristics. McFarland Lectures

  10. Logic of Appropriateness–Bounded Rationality in Action • Ambiguity is common • Lack of clarity in our agreements, experience, imitation, and change. • This renders matching frequently a process of satisficing again (it’s close enough). • Two theories in passing for later weeks: • Coalition Theory – Most organizations are composed of multiple actors with inconsistent and often conflicting preferences and identities (Allison’s Bureaucratic Politics!). • Stage 1 is the process of bargaining and coming to a consensus. • Stage 2 is the decision when understandings are executed. • This process is seldom discrete. • Garbage Can Theory – “Organized anarchy,” or the depiction of decision making in an organized chaos. McFarland Lectures

  11. Example: Cuban Missile Crisis Lecture 5 McFarland Lectures

  12. Near Armageddon • Seminal event – prevention of 100 Million deaths due to national government decision. Chance of failure = 1 out of 3 or 1 out of 2. • Analysts try to make sense of what happened, why, and what will happen using implicit conceptual models that have significant consequences for the way we see and react to problems. McFarland Lectures

  13. Events 1962 June- Soviet Premier Nikita Khrushchev meets Kennedy at summit, is unimpressed. September- The Soviet Union begins deploying nuclear missiles in Cuba. October 15 - American U-2 aircraft detect Soviet activity in Cuba (flights took a while to go). McFarland Lectures

  14. Events October 16-20 - ExCommformed and deliberates, ultimately recommending a blockade (invasion next). McFarland Lectures

  15. Events October 22 - Kennedy announces his plan to the nation by televised address.

  16. Events October 23 - Kennedy orders the blockade against Cuba (photos of Cuban sites shown to UN Security Council). McFarland Lectures

  17. Events October 23 - Kruschev writes Kennedy stating the quarantine "constitute[s] an act of aggression propelling humankind into the abyss of a world nuclear-missile war." October 24  - Russian vessels turn away from the blockade. October 25 – Blockage pulled further out to sea (worry of mistake boarding). McFarland Lectures

  18. Events October 26 - Khrushchev sends conciliatory message, followed by a second message demanding withdrawal of U.S. missiles from Turkey. October 27 - The "Trollope Ploy” (accept 1st message, ignore 2nd).  The message is treated as a genuine compromise and largely accepted. McFarland Lectures

  19. Events October 28 - Khrushchev agrees to withdraw the missiles from Cuba.  Kennedy secretly agrees to withdraw U.S. missiles from Turkey. November 19 - Removal of Soviet missiles from Cuba is complete

  20. Allison’s Models • Model 1 = Rational Actor • (Logic of Consequence) • Model 2 = Organizational Process • (Logic of Appropriateness) • Model 3 = Bureaucratic Politics • (Coalition theory – next week!) McFarland Lectures

  21. Rational Actor Model McFarland Lectures

  22. Organizational Process Model

  23. Bureaucratic Politics Model

  24. Summary Outline of Models and Concepts(Facsimile of Allison 1971, page 256) McFarland Lectures

  25. Which one works best? • Each model has shortcomings: RA -- Do reasons for choice explain its occurrence in action? (it exaggerates agency) OP -- Does path dependence fail to explain change? (too static) BP -- How much information is needed for bureaucratic politics?(too much data is needed) • Do they apply best to certain circumstances? Planning for crisis – RA (prospective plans) Reactive crisis – OP (response) Changing tentative decisions – BP (wrangling) McFarland Lectures

  26. Which one works best? • Do they complement one another? • Model 1 simplifies things to a single national actor, focuses on problems, incentives and decision points, and fixes the context and larger national patterns. • Within this context, model 2 illuminates the organizational routines that produce information, alternatives, and action. • Within the context of Model 2, Model 3 gives more detail on individual leaders and the politics among them that determine major choices. • Allison thinks they work best when synthesized. McFarland Lectures

  27. END McFarland Lectures

  28. Case: Chicago Public School Reforms Lecture 6 McFarland Lectures

  29. Chicago Public School Reforms • Chicago Public Schools during 1986-2001. 1986-1993 1994-2001 McFarland Lectures

  30. Chicago Public School Reforms • Readings by Dorothy Shipps and Anthony Bryk concern the efforts to reform Chicago Public Schools during 1986-2001. • How two reform efforts wax and wane – how they emerge, and devolve from problems. • Basic changes are aimed at anti-bureaucracy and forging managerialism / accountability so as to solve problem of low-achieving schools. • Case relates key stakeholders and groups, their interests and relations, and their responses. • Great case on which to apply our analytic constructs and theories. McFarland Lectures

  31. McFarland Lectures

  32. 2 Reforms with phases of waxing and waning!

  33. McFarland Lectures

  34. McFarland Lectures

  35. McFarland Lectures

  36. Which works best? • I think this is a great place where you can use the forum to ponder this. • Does the RA model work better in the centralized phase? • Does the RA model only superficially apply and most of the decisions follow an organizational process or heuristics and routines? • For those of you taking the advanced track, you will get a chance to review a series of papers that apply theories to this case and try to answer this. McFarland Lectures

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