The Naturalistic Turn in Economics:Implications for the Theory of Finance

Economics is increasingly adopting the methodological standards and procedures of the naturalsciences. The paper analyzes this ‘naturalistic turn’ from the philosophical perspective onnaturalism, and I discuss the implications for the field of finance. The theory of finance is aninteresting case in point for the methodological issues, as it manifests a paradigmatic tensionbetween the pure theory of finance and Behavioral Finance. I distinguish between three kindsof naturalism: mark I, the reduction of behavior on psychoneural phenomena, mark II, thetransfer of patterns of causal explanations from the natural sciences to the social sciences,mark III, the enrichment of the ontology from observer-independent to observer-relative facts.Building an integrated naturalistic paradigm from these three ingredients, I show that naturalismin economics will only be completed by a simultaneous linguistic turn, with languagebeing analyzed from the naturalistic viewpoint. I relate this proposition with recent results ofresearch into finance, especially connecting Behavioral Finance with the sociology of finance.