Rationalist vs. Behavioralist Paradigms
What are the two business paradigms? Within the business disciplines, we are fortunate to have two major paradigms (schools of thought): rationalist and behavioralist. An ideological/theoretical conflict has existed between the two paradigms for over 50 years. Is human decision behavior more consistent with the rationalist models or behavioralist models? Behavioral finance has grown out of this conflict and will likely result in the resolution of the conflict as time passes.
What is a paradigm? Thomas Kuhn's concept of paradigm is useful background for the debate between rationalists and behavioralists over decision making. His book The Structure of Scientific Revolutions is the premier philosophy of science work written during the 20th century. In it, he argues that science is not an inexorable truth machine that grinds out knowledge an inch at a time. Instead science progresses via leaps (termed scientific revolutions) separated by periods of calm (termed normal science). An important basic concept in Kuhn's work is his concept of paradigm-a term he originated but which has expanded to have many more meanings today. A scientific community consists of practitioners of a scientific specialty (e.g., physicists, chemists, psychologists, economists). According to Kuhn, a paradigm is what members of a scientific community share, and, conversely, a scientific community consists of people who share a paradigm. It includes a set of assumptions (many of which are unarticulated) and definitions. Paradigms gain status when they are more successful than their competitors in solving a few problems that the group of practitioners has come to recognize as acute. One of the things a scientific community acquires with a paradigm is a criterion for choosing problems that, while the paradigm is taken for granted, can be assumed to have solutions. To a great extent these are the only problems that the community will as admit as scientific or encourage
What is a paradigm? Thomas Kuhn's concept of paradigm is useful background for the debate between rationalists and behavioralists over decision making. His book The Structure of Scientific Revolutions is the premier philosophy of science work written during the 20th century. In it, he argues that science is not an inexorable truth machine that grinds out knowledge an inch at a time. Instead science progresses via leaps (termed scientific revolutions) separated by periods of calm (termed normal science). An important basic concept in Kuhn's work is his concept of paradigm-a term he originated but which has expanded to have many more meanings today. A scientific community consists of practitioners of a scientific specialty (e.g., physicists, chemists, psychologists, economists). According to Kuhn, a paradigm is what members of a scientific community share, and, conversely, a scientific community consists of people who share a paradigm. It includes a set of assumptions (many of which are unarticulated) and definitions. Paradigms gain status when they are more successful than their competitors in solving a few problems that the group of practitioners has come to recognize as acute. One of the things a scientific community acquires with a paradigm is a criterion for choosing problems that, while the paradigm is taken for granted, can be assumed to have solutions. To a great extent these are the only problems that the community will as admit as scientific or encourage