A virtue ethics critique of ethical dimensions of behavioral economics

• Date: 01 June 2020
• DOI: http://doi.org/10.1111/basr.12208
• Published date: 01 June 2020
• Author: Daryl Koehn

Bus Soc Rev. 2020;125:241–260.

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241

wileyonlinelibrary.com/journal/basr

Received: 11 February 2020

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Accepted: 12 February 2020

DOI: 10.1111/basr.12208

VERIZON LECTURE

A virtue ethics critique of ethical dimensions of

behavioral economics

DarylKoehn

© 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

Correspondence

Daryl Koehn, Department of Philosophy,

DePaul University, 2352 N. Clifton

Avenue, Chicago, IL 60614, USA.

Email: dkoehn@depaul.edu

Abstract

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.

KEYWORDS

behavioral economics, character, corporate culture, normative, virtue

ethics

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INTRODUCTION

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

way:

[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