About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

55 U. Kan. L. Rev. 629 (2006-2007)
Law and Economics after Behavioral Economics

handle is hein.journals/ukalr55 and id is 639 raw text is: Law and Economics After Behavioral Economics Grant M Hayden* & Stephen E. Ellis** 1. INTRODUCTION Economic theory is a sort of distilled common sense: it draws out the implications of the view that people act to best get what they want, given what they believe about their circumstances. That basic insight is used to build mathematical models that are intended to explain and predict human behavior. Those models are useful in many ways-most centrally, they allow us to structure incentives in order to achieve important ends.' Structuring incentives on any kind of large scale is a job for governments, and the tool they use is the law. Thus, it should come as no surprise that lawmakers have looked to economic theory for guidance. And, indeed, the law and economics movement has become, by almost any measure, the most dominant school of legal thought in the last half a century.2 But there is sufficient reason to conclude that economic theory, as it stands, is flawed. While economic models have had their successes, a large and growing body of empirical evidence reveals that people often fail to live up to the rational-actor ideal of standard economics.3 Real people, it turns out, use mental shortcuts. They display systematic biases when they make judgments. And they occasionally take actions that conflict with their interests, in both the long and short term. As a result, Professor of Law, Hofstra Law School. J.D. Stanford Law School. The authors would like to thank Alafair Burke, John Gregory, Chris Guthrie, Russell Korobkin, Greg Mitchell, and Jeff Rachlinski for their helpful comments on earlier drafts of this work. .. Assistant Professor of Philosophy, University of Oklahoma. Ph.D. Rutgers University. I. There is some debate about what those ends should be. Normally, we try to maximize people's ability to get what they want, on the assumption that they know their own needs. In certain cases, however, we seek to discourage the pursuit of certain ends, e.g., heroin-induced stupors. 2. E.g., Francesco Parisi, Introduction to THE ECONOMIC STRUCTURE OF THE LAW: THE COLLECTED ECONOMIC ESSAYS OF RICHARD A. POSNER, at ix, xxxii (Francesco Parisi ed., 2000); Thomas S. Ulen, A Crowded House: Socioeconomics (and Other) Additions to the Law School and Law and Economics Curricula, 41 SAN DIEGO L. REV. 35, 36 (2004). See generally RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW (6th ed. 2003) (applying economic theory to virtually every field of law); STEVEN SHAVELL, FOUNDATIONS OF ECONOMIC ANALYSIS OF LAW (2004) (same). 3. See infra Parts IIB, III.A (discussing this failure and the emergence of behavioral economics).

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most