Simon on Hierarchy

19 September 2006 at 1:31 pm Nicolai Foss 3 comments

| Nicolai Foss |

I have always been surprised and somewhat disturbed by the tendency in Herbert A Simon’s work to elevate hierarchy and organization over markets. Of course, Simon was a liberal democrat — but he was also a great scientist.

The most visible expression of this tendency is probably Simon’s heavily cited 1991 paper in the Journal of Economic Perspectives, “Organizations and Markets.” Another manifestation of the tendency is Simon’s even more (in fact, much more) famous 1962 paper, “The Architecture of Complexity,” in which hierarchical structure is seen as the master-principle for understanding “the architecture of complexity.”

In an interesting paper, “Hierarchy and History in Simon’s ‘Architecture of Complexity’,” UCLA professor Philip Agre argues that Simon’s paper arose as a critique of general systems theory and its attempt to elevate self-organization over any hierarchical principles. He furthermore sees Simon’s argument as very strongly reflecting the general tenor of the times, what may be called McNamaraism (tellingly, Chandler’s Strategy and Structure was also published in 1962); thus, “… the patterns that Simon discerned became visible within the larger context of the time.”

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3 Comments Add your own

1. Peter Klein | 19 September 2006 at 1:58 pm

Fascinating…. I very much admire Simon’s 1962 paper, but had never thought much about the context in which it was written. Note that the conglomerate movement, and Geneen-style “management by the numbers,” also peaked in the 1960s. Complexity was very much in vogue, across the board.

An interesting book on this is John Byrne’s _The Whiz Kids_. Robert Sobel’s history of ITT is also worth a read.
2. Joe Mahoney | 20 September 2006 at 6:23 am

Simon (1962) is using the term “hierarchy” to mean an architecture that deploys sub-systems, which Williamson (1975) used to connect Simon (1962) with Chandler’s (1962) work on the muli-divisional form of organization, which is a form of organizational sub-systems.

Simon (1962), however, is silent on whether the coordination of the sub-systems will be done by markets or authority (or “hierarchy” in the Williamson use of the term).

Note that Roy Radner in Journal of Economic Literatrue in 1992 (if I remember the year correctly) asked the question of whether hierarchy in the SImon (1962) sense of the term required hierarchy in the Williamson (1975) sense of the term!
3. JC Spender | 20 September 2006 at 10:22 pm

And the concept of the co-ordination of subsystems as the process of creating the organization comes to Simon from Barnard. We can wonder just how much influence Barnard had over Simon’s exegesis. My friend Bill Wolf, Barnard’s biographer, has tales to tell on this matter.

I am eager to read Agre’s paper – but I get the feeling that you guys think Simon’s understanding of ‘hierarchy’ is close to traditional bureacracy. Can this be right?