European integration assessed in the light of the 'rules vs. standards debate'

The interplay of various legal systems in the European Union (EU) has long triggered a debate on the tension between uniformity and diversity of Member States' (MS) laws. This debate takes place among European legal scholars and is also paralleled by economic scholars, e.g. in the ambit of the 'theory of federalism'. This paper takes an innovative perspective on the discrepancy between 'centralized' and 'decentralized' law-making in the EU by assessing it with the help of the rules versus standards debate. When should the EU legislator grant the national legislator leeway in the formulation of new laws and when should all be fixed ex ante at European level? The literature on the 'optimal shape of legal norms' shall be revisited in the light of law-making in the EU, centrally dealing with the question how much discretion shall be given to the national legislator; and under which circumstances. This paper enhances the established decisive factors for the choice of a rule or a standard in a national setting (complexity, volatility, judges' specialization and frequency of application) by two new crucial factors (switching costs and the benefit of uniformity in terms of information costs) in order to assess law-making policies at EU level

Toward a “constitution” for behavioral policy-making

Behavioral policy interventions aimed at redirecting individuals’ behavior toward optimal choices are characterized by an important issue which is often overlooked: the lack of an instrument to define what “optimal” means. If agents are subject to behavioral biases leading them to make “wrong” choices, the policy-maker can no longer rely on the revealed preferences approach (e.g., what people choose is what people prefer) for defining a welfare criterion. In this article, we reiterate the argument put forward by some scholars that choosing a suitable welfare criterion once the link between observed choices and individuals’ preferences is broken becomes a problematic task. We review the state of the art in the literature and the possible approaches proposed to overcome the problem, concluding that a solution has not yet been reached. Moreover, we argue that the lack of an established welfare criterion characterizing behavioral policy-making could pave the way to government wanting to restrict individual freedom. In the absence of any legislative constraint for the executive, stating that what individuals choose is not what they prefer in principle justifies any freedom-reducing government intervention, since choices can be arbitrarily labeled “sub-optimal” or “welfare-reducing.” To avoid this risk without turning down the potential of behavioral policy-making, we propose that an independent committee establishes ex ante procedural rules and domains where behavioral policy-making can be implemented. The article suggests some possible examples of normative provisions characterizing this constitution-type document, such as the selective identification of the only sectors where behavioral policies could be effectively applied, the periodic evaluation of policy effects, and the use of sunset clauses

Endowment effect

A vast body of experimental studies in psychology and economics finds that individuals tend to value goods more and demand higher prices when they own the goods than they would be willing to pay for the good when they do not already own it. Although research on the endowment effect has been done for more than three decades, it’s theory, empirical methodology, results, and implications continue to be topics of intense discussion among economists, lawyers and psychologists. In this entry, we review the theoretical framework and empirical evidence on the endowment effect and highlight some implications for law and economics research

In Search of the Theory of Harm in EU Consumer Law: Lessons from the Consumer Fitness Check

ecently, EU Consumer law has undergone a ‘Fitness Check’ (or REFIT). We thought that checking the fitness for purpose of a body of law would involve revisiting its purpose. This is why we expected to find in the rich REFIT documentation (over 4000 pages of studies and Commission documents) an explicit discourse on the goals of consumer law. Our aim was to connect this discourse to two lines of scholarship: a doctrinal line pointing out that EU consumer law lacks a clear direction and that, to the extent it does have one, it is too strongly geared towards market integration to the detriment of protection of the weakest, and an economically informed approach seeking to formulate a theory of harm that could underpin the enforcement of consumer law, by analogy with the practice in competition law. We agree that a clearer direction and a stronger conceptualisation of what harms the law seeks to protect consumers against would improve EU consumer law. This paper defines a ‘theory of harm’, illustrates what a theory of harm for consumer law could look like and analyses the REFIT documentation in search for elements of such a theory. Our findings are largely disappointing. We looked for something that is not there. The REFIT’s tour de force is to check fitness for purpose without discussing purpose. It does so by adopting a circular approach and defining consumer harm as instances of under-enforcement of the law. This presupposes that all possible harms are already accounted for in the law and only occur when the law is not properly enforced. We uncover an irony instead of a theory of harm. What the REFIT does delineate is a normative space in which to develop a theory of harm for the future. It consists of a virtuous triangle of empowerment, trust and a well-functioning internal market. The REFIT also suggests that an economic-based theory of harm would need to interact with several legal elements. Consumer weakness, empowerment and legitimate expectations constitute ingredients for an economically grounded, behaviourally sensible and legally workable theory of harm