The Complexity of Disentangling Intrinsic and Extrinsic Compliance Motivations: Theoretical and Empirical Insights from the Behavioral Analysis of Law

This Essay presents a behavioral legal analysis on the interrelationships between love and money through a discussion of intrinsic and extrinsic compliance motivations. It mentions the aspects through which the extrinsic and intrinsic compliance motivations interact with each other including the “crowding-out literature” and the expressive literature. It discusses on the normative implications of the said aspects, which lead on the suggestions on the way to countervail the effects of money

Are All ‘Legal Dollars’ Created Equal?

For several decades law and economic scholars have employed the tools of price theory in order to evaluate an array of legal questions ranging from criminal sanctions to contract remedies. This vast body of literature implicitly assumed that all payments made through the legal system are fungible. In other words, just as a dollar paid for a tomato is identical to a dollar paid for a cucumber, so are a dollar paid as a pollution tax to the government and a dollar paid as compensation to the party injured by the pollution. In this study we challenge this assumption, and present empirical evidence that documents systematic and consistent differences between distinct types of legal payments. We used a sample of 420 students who received a description of a hypothetical scenario that involved the behavior of an owner of a factory that creates a negative externality in its production process. We then manipulated the legal regime that participants were subject to along three dimensions: timing of payment (ex-ante v. ex post), identity of recipient (state vs. injured party), and the level of certainty (certain vs. probable), and compared the way participants perceived the situation using an array of psychological variables. Our findings indicate that there is a continuum of legal payments that are perceived differently by people, and as a result generate distinct incentives. At one end of this continuum lie legal payments that are similar in structure to a paradigmatic price. These are payments made to another private party in advance. At the other end of the continuum lie legal payments that are similar in structure to the paradigmatic punishment. These are payments that are made after the fact to the state, and that their assessment is probabilistic. The analysis presented in the paper offers a significant contribution to current scholarly work in fields such as criminal law, tort law, law enforcement, and environmental regulation. For example, our findings indicate that shifting to a system of pollution taxes might transform the way in which polluters treat the price the law sets for their activity. Furthermore, the framework we introduce in this study can be extended to a wide range of empirical studies that will help broaden our understanding of the social meaning of legal dollars

Behind the Veil of Legal Uncertainty

This article challenges the conventional view and proclaims the advantages of legal uncertainty. This article recognized some of the drawbacks may arise due to uncertainty and hence illustrated several refinements and limitations regarding the use of a veil of uncertainty mechanism in order to improve its potential benefits for lawmakers

The Law and Norms of File Sharing

This Article provides a survey of the current status of file sharing in the law. File sharing raises issues of copyright law, harm to sellers of media, and issues of morality (harming another financially) in general. The article addresses the effect that the perception of recording industry greed has on the decision to share files, as well as the perception of legality that the populous at large has about sharing files. The article thus takes both an introspective look at the status of the law regarding file sharing and gauges the current climate of motivations behind the behaviorally driven phenomenon. The authors of this article then take the next logical step and consider the effect that the law has had and is going to have on social norms, which define what acceptable behavior is. The discussion of the effect of law on social norms includes a consideration of empirical evidence for the skeptically minded. The second half of the article is a presentation of an empirical study that the authors themselves performed with 240 undergraduate students at a public university in the United States. The study was meant to provide some indication of the effect of law on student\u27s thought about file sharing. The students were not intended to be a representative sample but rather generate preliminary observations. All of the students were asked what they thought about how students in general were going to behave in the future regarding file sharing, and filled out a questionnaire on the subject. The control group answered the questionnaire without additional information. The Law only group (the test group) was asked to answer in light of the additional information provided by a copy of the university policy stating that file sharing was against the law. This test group then was further subdivided into three groups, first a group that answered with the information that formal sanctions may be imposed on university members (official warnings and suspensions), second into a group that answered in light of informal sanctions (posting names of offenders on website) and finally one that answered in light of moral duties (exhortation to refrain from the bad offense). The article next discusses the result that merely citing the university policy that file sharing was illegal did not have much effect to the test group, but adding to that the idea of formal or informal sanctions did encourage a negative view of file sharing. The third group that was issued a moral exhortation had the same answers and views as the control group, the moral exhortations did not have an effect. The article then considers policy implications, including the implication that shaming sanctions such as posting the names on the website are at least perceived by the students in this study to be effective, which is something that is contrary to the results of other studies. The other policy consideration is that the RIAA\u27s commercials where artists explain why they think that file sharing is wrong probably aren\u27t going to have the desired effect because it seems that students at least don\u27t buy into the theory of morality presented

Corporate Law for Good People

This Article offers a novel analysis of the field of corporate governance by viewing it through the lens of behavioral ethics. It calls for both shifting the focus of corporate governance to a new set of loci of potential corporate wrongdoing and adding new tools to the corporate governance arsenal. Behavioral ethics scholarship emphasizes that the large share of wrongdoing is generated by “good people” whose intention is to act ethically. Their wrongdoing stems from “bounded ethicality”—various cognitive and motivational limitations in their ethical decision-making processes—that leads to biased decisions that seem legitimate. Bounded ethicality has important implications for a wide range of topics in corporate governance, like board structure, independent directors, regulation of institutional investors and proxy advisory firms, the business judgment rule, corporate liability, and intraboard fiduciary duties. In the legal domain, corporate law provides the most fertile ground for the application of behavioral ethics. It encapsulates many of the features that the behavioral ethics literature finds to confound the ethical judgment of good people, like principal–agent relations, group decisions, victim remoteness, vague directives, and subtle conflicts of interest. Behavioral ethics suggests a view of corporate law that is dramatically different than that portrayed by traditional legal and economic theorists. Not only does it suggest that wrongdoing can be committed by well-intentioned people who wish to do right, but also that the biases they display call for a radically different set of legal interventions than those advocated by standard economic theory. If standard theory views corporate agents as self-interest- maximizers, bounded ethicality perceives them as actors with varied and nuanced ethical motivations that could benefit from subtle legal reforms. This Article’s assessment of corporate governance through the behavioral ethical lens proceeds in three stages. First, it exposes potential wrongdoing by good people that conventional corporate governance does not address. Second, it suggests novel corporate governance interventions supported by behavioral ethics to address wrongdoing by good people. Finally, it identifies existing interventions that, according to behavioral ethics analysis, may have unintended adverse effects on the behavior of well- meaning corporate officers and exacerbate wrongdoing instead of mitigating it

Corporate Law for Good People

This article offers a novel analysis of the field of corporate governance by viewing it through the lens of behavioral ethics. It calls for both shifting the focus of corporate governance to a new set of loci of potential corporate wrongdoing and adding new tools to the corporate governance arsenal. The behavioral ethics scholarship emphasizes the large share of wrongdoing generated by good people whose intention is to act ethically. Their wrongdoing stems from bounded ethicality -- various cognitive and motivational processes that lead to biased decisions that seem legitimate. In the legal domain, corporate law provides the most fertile ground for the application of behavioral ethics since it encapsulates many of the features that the behavioral ethics literature found to confound the ethical judgment of good people, such as agency, group decisions, victim remoteness, vague directives and subtle conflict of interests. Bounded ethicality suggests a view of corporate law that is dramatically different than that portrayed by traditional legal and economic theorists. Not only does it suggest that wrongdoing can be committed by well-intentioned people who wish to do right, but also that the biases they display call for a radically different set of legal interventions than those advocated by standard economic theory. If standard theorizing views corporate agents as self-interest maximizers, bounded rationality perceives them as actors with varied and nuanced motivations that could benefit from subtle legal reforms.This Article\u27s assessment of corporate governance through the behavioral ethical lens proceeds in three stages. First, it exposes potential wrongdoing by good people that conventional corporate governance does not address. Second, it suggests novel corporate governance interventions supported by behavioral ethics to address wrongdoing by good people. Third, it identifies existing interventions that according to behavioral ethics analysis may generate unintended adverse effects on the behavior of well-meaning corporate officers and exacerbate wrongdoing instead of mitigating it. As we will show bounded ethicality has important implications for a wide range of topics in corporate governance, such as board structure, independent directors, regulation of institutional investors and proxy advisory firms, the business judgment rule, and corporate and intra-board liability