Comment: The Future of Behavioral Economic Analysis of Law

Behavioral economic analysis of law presents an important challenge to conventional law and economics, strengthened in part by the fact that conventional law and economics is itself a behavioral approach to law. Indeed, conventional law and economics can be viewed as the first widely-adopted behavioral approach to law. A central contribution of Ronald Coase\u27s pathbreaking article was the claim that one cannot determine the effect of a law by simply looking at the law itself--at the conduct the law requires. Instead, one must determine how people will respond to the law.\u27 Legal rules, he argued, do not dictate behavior-they simply establish prices and sanctions for various actions. Thus the initial allocation of a resource will not necessarily determine its ultimate use because people will bargain when doing so is mutually profitable. This is, at its core, a behavioral analysis of law. Where behavioral economic analysis of law and conventional law and economics differ, however, is in the model of human behavior they employ. Conventional law and economics assumes that people exhibit rational choice: that people are self-interested utility maximizers with stable preferences and the capacity to optimally accumulate and assess information Law and economics scholars do not claim that this rational choice model perfectly captures all human behavior. But they do claim that deviations from rational choice generally are not systematic, and thus generally will cancel each other out. For example, law and economics scholars argue that even if people do not accurately estimate the risk that they will be injured, some people will overestimate the risk while others will underestimate it, producing only noise and not a systematic bias. These scholars thus assert that rational choice, while not a perfect description of human behavior, is the best workable approximation of human behavior. Behavioral economic analysis of law scholars argue that people do not behave consistently with rational choice theory, and, moreover, that the deviations from rational behavior are systematic, not random. Most people are likely to exhibit certain biases, they assert, and thus these deviations from rational choice do not cancel each other out. Indeed, behavioral economic analysis of law scholars argue that biased reasoning is a more plausible model of human behavior than is rational choice because biased reasoning is what natural selection would most likely produce. These systematic deviations from rational choice theory present a challenge to conventional law and economics. Conventional law and economics generally seeks to influence-or at least describe the effects of-actual policy in the real world. Yet if people regularly behave differently than the economists\u27 model predicts, the results of this analysis may be suspect

The Essential Role of Empirical Analysis in Developing Law and Economics Theory

Throughout its history, the development of theoretical law and economics has depended on, and been shaped by, empirical analyses of law. Theoretical law and economics scholars cannot draw persuasive positive or normative conclusions about legal rules unless the models employed accurately capture the factors affecting people’s responses to legal rules. Models thus must accurately describe decision-makers’ decision-making environment, available choices, and decision-making processes. Empirical analysis plays a vital role in theoretical scholars’ ability to develop such models. Empirical analyses can improve theoretical models by testing the predictions of models; refuted theoretical predictions regularly spur lead theoreticians to revise and improve their models. Empirical analyses also contribute by providing direct evidence on the decision-making environment, available choice sets, or decision-makers’ mental processes. This interaction of empirical analysis and theory has led theoretical law and economics to rely increasingly on models predicated on incomplete information, incomplete contracting, and decision-making that deviates from rational choice theory

A Tribute to Judge Phyllis A. Kravitch

This is a tribute to Judge Phyllis A. Kravitch, who honorably served two decades on the bench during a period of great transition in the South

A Tribute to Judge Phyllis A. Kravitch

This is a tribute to Judge Phyllis A. Kravitch, who honorably served two decades on the bench during a period of great transition in the South