Final answer:
The correct answer is option d. Bounded rationality refers to making decisions within a set of constraints. Despite aiming for rational choices, individuals are limited by information, cognitive biases, and time, suggesting that decision-making is often done with bounded rationality rather than purely rationally.
Step-by-step explanation:
Bounded rationality refers to d) making decisions within a set of constraints. This concept recognizes that individuals aim to make rational decisions, but are limited by the information available, cognitive limitations, and time constraints. Rationalism indicates a high regard for reason, positing that reason is the primary source of knowledge and that people can have logical knowledge without sensory experience. However, traditional economic models often assume that individuals act purely rationally, taking all available information to make the best decisions for their welfare.
In contrast, bounded rationality suggests that individuals operate within limitations. Political and social sciences define a rational individual as someone self-interested and strategic, aiming to maximize their own well-being. While people may try to make decisions that are rational, cognitive shortcuts like heuristics are often utilized for quicker, easier decision-making, reflecting the bounded rationality in real-life scenarios.
Understanding that rationality has bounds is crucial in areas like economics and political science because it shapes how theories and models are constructed to predict and explain actual human behavior in economic and political environments.