A virtue ethics critique of ethical dimensions of behavioral economics

Date01 June 2020
Published date01 June 2020
AuthorDaryl Koehn
Bus Soc Rev. 2020;125:241–260.
Received: 11 February 2020
Accepted: 12 February 2020
DOI: 10.1111/basr.12208
A virtue ethics critique of ethical dimensions of
behavioral economics
© 2020 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by Wiley Periodicals, Inc., 350 Main Street, Malden,
MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.
Department of Philosophy, DePaul
University, Chicago, IL, USA
Daryl Koehn, Department of Philosophy,
DePaul University, 2352 N. Clifton
Avenue, Chicago, IL 60614, USA.
Email: dkoehn@depaul.edu
Behavioral economics is the latest trendy form of econom-
ics. Increasingly theorists are advocating using behavio-
ral economics to do normative ethics or claiming that the
behavioralists’ findings render normative claims otiose. I
argue in this paper that we should be extremely wary when
it comes to accepting any such normative pronouncements.
I argue that behavioral economics: (a) minimizes and/or
misunderstands the role that character and architectonic life
goals play in accounting for the why of ethical behavior, (b)
fundamentally misconceives human practical rationality, (c)
often unduly narrows the range of human action and choice,
(d) misleadingly assumes that options are merely given to
us rather than generated by us in accordance with our char-
acter, (e) is parasitic upon normative ethics, (f) results in
an unhelpful ad hoc approach to ethical thinking, which is
unlikely to prove all that useful and may even dangerously
mislead ordinary agents or those who operate corporate
compliance programs and who seek to improve corporate
cultures, and (g) ignores the key role played in ethical be-
havior by meso- and macro-factors.
behavioral economics, character, corporate culture, normative, virtue
Behavioral economics is the latest trendy form of economics. Richard Thaler, one of the founders of
behavioral economics, describes the field as “economics done with strong injections of good psy-
chology” (Gal & Rucker, 2018). This relatively new field uses psychology while adhering to the
traditional economic emphasis on mathematics to explain the field data (Camerer,1999). In addition,
the approach often invokes physiology and evolutionary theory as it seeks to specify the underly-
ing psychological and motivating mechanisms that lead individuals to choose and to act in the way
they do (Cory,2004; Sanfey, Rilling, Aronson, Nystrom, & Cohen,2003; Zandstra, Miyapuram, &
Tobler,2013). Dan Ariely, a leading behavioral economist, characterizes this field in the following
[T]he best way to think about behavioral economics is in contrast to standard economics.
In standard economics, we think—we assume—that people are perfectly rational, which
means that they always behave in the best way for them. They can compute everything,
they can calculate everything and they can make, always, consistently, the right deci-
sions. In contrast, behavioral economics doesn't assume much about people. Instead of
starting from the idea that people are perfectly rational, we say we just don't know, but
let's check it out. So, what we do is we put people in different situations to check how
they actually make decisions. And what we find in those experiments is that people often
don't behave as you would expect from a perfectly rational perspective. So, in essence,
it's an empirical and non-idealistic way to start looking at human behavior. And because
we find that people behave differently than expected, often irrationally, it also leads often
to different conclusions about how companies should be created, what the government
should do, and, of course, what individuals should be doing (SuperScholar, 2011).1
One major tenet of behavioral economics repudiates classical microeconomics’ assertion that agents
act and choose rationally. According to behavioral economists, such an assertion of rationality is, in some
significant respects, false, for it fails to take into the influential role played by emotions and nonrational
heuristics and inferences (Laibson & Zechauser, 1998). A second key tenet is that we can better under-
stand and influence human behavior if we pay special attention to how choices are presented to individu-
als (e.g., Choi, Haisley, Kurkoski, & Massey,2017). Both of these claims are supposedly substantiated by
various experiments in which behavioral economists subtly alter modes of presentation: Are people more
inclined to take action if they are given fewer, rather than more options? If so, then microeconomics’ stan-
dard assumption that offering more market options is always desirable is false. Are people more or less
inclined to run a certain risk if an identical risk is presented in positive rather than negative terms? If so,
then pace classical economics, agents do not always calculate in accordance with the formal rational laws
of probability. The question thus becomes: What exactly is causing individuals to rely upon nonrational
heuristics overlooked by classical microeconomics?
These experiments have been used to underwrite a key related claim made by behavioral econ-
omists. Citing the behavioral laws they claim to have discovered experimentally, these economists
maintain that, through small scale interventions (often involving altering presentations of options),
we can discern how to nudge people into making ethically better or more “pro-social” choices. Or,
as Ariely (2010) puts it, behavioral ethics helps us reach correct conclusions about what the govern-
ment should do to get individuals to act as they ought. In making these normative claims, behavioral
economists have clearly entered into the realm of ethics. Much of behavioral economics is thus better
thought of as what I will call “econoethics.” Indeed, some philosophers have now gone so far as to

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