Judicial Choice and Disparities between Measures of Economic Values

An important idea, which characterizes law in society, is a reluctance to move from the status quo. In general, one can argue that legal institutions and legal doctrine are not engaged in the redistribution of wealth from one party to another. This paper explores a possible explanation for that principle. The authors\u27 research suggests that, across a wide range of entitlements and in a variety of contexts, individuals value losses more than foregone gains. The paper argues, as a matter of efficiency, that law and social policy might have developed in a manner consistent with this valuation disparity. Furthermore, this valuation disparity can be transformed into conceptions of fairness, and, as a matter of fairness, legal decisions might have developed in a manner consistent with this fairness norm. In the first part of the paper, the economic and psychological research on the valuation disparity is described in detail. The paper then examines a series of legal doctrines, all of which can be explained by the valuation disparity phenomenon revealed in the experimental data. Cohen and Knetsch conclude that the behaviour of legal institutions and actors can be explained by the valuation disparity

Tax evasion and exchange equity: a reference-dependent approach

The standard portfolio model of tax evasion with a public good produces the perverse conclusion that when taxpayers perceive the public good to be under-/overprovided, an increase in the tax rate increases/decreases evasion. The author treats taxpayers as thinking in terms of gains and losses relative to an endogenous reference level, which reflects perceived exchange equity between the value of taxes paid and the value of public goods supplied. With these alternative behavioral assumptions, the author overturns the aforementioned result in a direction consistent with the empirical evidence. The author also finds a role for relative income in determining individual responses to a change in the marginal rate of tax