Rationalist vs. Behavioralist Paradigms

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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
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Since no paradigm ever solves all the problems it defines and since no two paradigms leave all the same problems unsolved, paradigm debates always involve the question: Which problem is it more significant to have solved? Like the issue of competing standards, the question of values can only be answered in terms of criteria that lie outside of normal science altogether, and it is that recourse to external criteria that most obviously makes paradigm debates revolutionary. If many revolutions have shaken the very foundations of various fields, then why are we as lay people unaware of it? Textbooks. Textbooks are teaching vehicles for the perpetuation of normal science and have to be rewritten whenever the language, problem structure, or standards of normal science change. They have to be rewritten in the aftermath of each scientific revolution, and, once rewritten, they inevitably disguise not only the role but the very existence of the revolutions that produced them. Textbooks truncate the scientist's sense of the discipline's history and then proceed to supply a substitute for what they have eliminated. This textbook derived tradition never existed. And once the textbooks are rewritten, science again comes to seem largely cumulative and linear.

What is the rationalist paradigm? The rationalist paradigm (e.g., microeconomics and finance) is focused upon the structure and processes of markets. The market is seen as dominating other potential

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