Published in Journal of Business Ethics and Organization Studies, Volume 12, Issue 2, January 1, 2002, pages 1-10.
Although not immediately apparent, the discipline of behavioral finance is rapidly adopting an implicit prescriptive agenda. Behavioral finance does not merely describe financial market reality, it shapes it. Economic rationality is taken as the ideal toward to which individuals 'should' strive. In this paper I show that, as a behavioral ideal, economic rationality is unjustified both from a strictly economic perspective, and from a moral perspective. In short, there is nothing inherently 'wrong' with economically irrational participants in the business environment. Indeed such participants will actually enhance the efficiency, and the ethicality, of business. "rationality itself, whether theoretical or practical, is a concept with a history: indeed, since there are a diversity of traditions of enquiry, with histories, there are ... rationalities rather than rationality" (Alasdair MacIntyre, Whose Justice, Which rationality, 1988, p. 9).
The definitive version is available at http://urn.fi/URN:NBN:fi:jyu-201010012850.