Introduction

The concept of fiduciary duty sits at the confluence of two powerful streams of Western intellectual thought, the legal and the economic: the legal because fiduciaries are managing the assets of others whose interests the law seeks to protect; the economic because fiduciaries assume the role of investors in the marketplace in managing these assets.

These legal and economic traditions pull fiduciaries in different and sometimes conflicting directions because their standards of appropriate behavior differ. Lawyers often use the standard of “reasonable” behavior, while economists frequently presuppose that people act “rationally.” Reasonable behavior, which finds notable expression in tort law, supposes that one takes into account the effect of one’s actions on others. The reasonable is by extension concerned with the protection or enhancement of a common good. Rational behavior, which is axiomatic to many neoclassical economists, is essentially self-interested and seeks to identify the most efficient means of achieving one’s personal ends. The rational is primarily concerned with the attainment of private goals.