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7-3 | 2017 :
The Behavioural Turn in Law and Economics
The Behavioural Turn in Law and Economics
S M. S
p. 331-352
Résumés
English Français
A number of prominent advocates of applying behavioral economics to the law make the claim that behavioral law and economics is simply a
refinement of traditional law and economics. The key difference is that behavioral law and economics uses more realistic descriptions of
human behavior as its foundation. This paper takes issue with that claim. We first demonstrate through a series of examples that the strongest
adherents of behavioral law and economics take positions that can be seen as subversive of the fundamentals of the core rationality principles
underlying traditional law and economics. Second, the assessment of welfare within behavioral economics differs sharply from the traditional
economic paradigm used in law and economics.
Nombre de partisans influents de l’application de l’économie comportementale au droit considèrent que l’économie du droit comportementale
constitue simplement un raffinement de l’économie du droit traditionnelle. La principale différence serait que l’économie du droit
comportementale emploie des descriptions plus réalistes du comportement humain comme fondements. Cet article questionne cet argument.
On montre d’abord, au travers d’une série d’exemples, que les principaux promoteurs de l’économie du droit comportementale adoptent des
positions qu’on peut considérer comme subversives par rapport au noyau fondamental des principes de la rationalité, sous-jacents à
l’économie du droit traditionnelle. Deuxièmement, on montre que l’évaluation du bien-être diffère substantiellement du paradigme
économique traditionnel utilisé par l’économie du droit.
Entrées d’index
Mots-clés : économie comportementale, analyse économique du droit, économie du droit comportementale, analyse du bien-être
Keywords : behavioural economics, law and economics, behavioural law and economics, welfare analysis
Texte intégral
We believe that the standard assumption of rational maximization is apt for many legal applications—notably the study of the
behavior of private enterprise—and has proven to be useful in a wide range of other settings. Nevertheless, when behavioral
economics, cognitive psychology, evolutionary biology, sociology, or anthropology yields valid insights, they should be
incorporated in legal policy analysis. (Kaplow and Shavell, 2002, 463, citations omitted.)
43 They emphasize that although these alternative approaches may yield better predictions of behavior, improvements in
positive economics, we still should rely on traditional principles of normative assessment based on maximization of stable
individual preferences.
44 Kaplow and Shavell present two examples where behavioral insights may be important in developing better positive economic
models of behavior. Cognitive psychology may establish that physicians may overreact to highly publicized jury verdicts on
medical malpractice. This finding could change the relative balance of alternative legal rules in determining the best approach to
induce the proper level of precautionary behavior on the part of doctors. In another example, suppose that widespread non-
compliance in the tax system spills over to individuals and causes them also to become more non-compliant. In this case, the
optimal penalties for non-compliance and the level of resources devoted to detection of non-compliance by the tax authorities
would change (Kaplow and Shavell, 2002, 463). Despite the nod that two prominent practitioners of traditional law and
economics give to behavioral approaches, there are two potential problems with this strategy of accommodation and
assimilation of behavioral factors into law and economics. The first is the lack of quantitative precision of behavioral economics
as it stands today. The second, which is perhaps even more fundamental and we defer to next section, is the difficulties that
behavioral economics poses for the assessment of welfare.
45 In its current state of knowledge, behavioral economics can be suggestive of strategies that lead to changes in behavior, but
cannot provide narrow ranges for the scope of its effects. For example, the differences between measures of willingness to pay
versus willingness to accept in environmental studies range widely and are notoriously fragile. Part of the reason is that the
method used to determine differences between willingness to pay and willingness to accept typically relies on hypothetical
scenarios posed to individuals. This method of contingent valuation has attracted a good deal of scientific skepticism. In the title
of a well-known article, MIT economist Jerry Hausman (2012, 43) suggested the method of contingent valuation ranged from
“dubious to hopeless.”24
46 While there are experimental studies of the endowment effect, most are laboratory studies with the recognized problems of
external validity in generalizing to phenomenon outside the narrow confines of the laboratory. Dan Ariely conducted a
fascinating field experiment with Duke basketball tickets by comparing the willingness to pay and accept for losers and winners
of a lottery among passionate basketball fans. His finding that winners of the lottery would only sell their tickets for $2400
whereas losers would only buy tickets for $170 was striking but well out of the range of typical estimates of the endowment
effect. Typical estimates of willingness to accept to willingness to pay are usually less than two to one, not over the twelve to one
that Ariely found (Kahneman et al., 1990). Thus, while most studies do find evidence for an endowment effect, its quantitative
measure is uncertain. In that case, how can behavioral law and economics analyze the alternative consequence of legal rules,
except by making them very context-dependent?
47 The same type of problem arises in analyzing the quantitative responses to nudges. One of the primary motivations for
creating the Behavioral Insight Team in the United Kingdom and the Social and Behavioral Science Team in the United States
was to provide quantitative estimates of the efficacy and effects of nudges from the public sector. Both groups used field studies
to test different behavioral strategies. The groups are equipped with basic hypotheses supplied by research in behavioral
economics, but often little quantitative guidance. For example, investigators may wish to find out how to reduce the accounts
receivable of a tax authority—that is, how can we increase the amount and speed of payment from taxpayers who have been
contacted by the authorities and asked to remit more taxes (Hallsworth et al., 2014)? Should we use fear and emphasize
penalties or should we emphasize virtues of being a good citizen? What about highlighting the speed at which other taxpayers
settle their bills? The results of such a study could be extremely valuable to the tax authority and more than justify the costs of
this type of field research. Indeed, the authors of a recent study found that including social norms and public goods messages in
letter from authorities did speed up payments. While the research may be clearly worthwhile, one natural question is how well
does it generalize? Do appeals to patriotism always trump fear—or, as some studies have suggested, do references to comparison
groups matter the most (Thaler and Sunstein, 2008, chapter 3)? It is safe to say that we are a long way away from establishing
any of these viewpoints as universally valid and even further away from achieving reliable quantitative estimates. The fragility of
quantitative measures in behavioral economics mirrors the tentative and often uncertain conclusions in social psychology that
have been recently been the subject of some attention.25
48 While the same critique could be leveled at traditional economics, there is typically more theoretical guidance from basic
price theory as to where to measure and look for the effects of policies. Perhaps someday behavioral economics could reach that
point, but the open ended experimentation of the governmental entities and their frank admissions that their findings are
context-dependent, suggest otherwise.
Thanks are due to the editors of this special issue and to the anonymous referees.
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Notes
1 In the United Kingdom, there is the Behavioral Insight Team while during President Obama’s administration the Social and Behavioral
Science Team was created.
2 Richard Posner’s Economic Analysis of the Law was first published in 1973.
3 Jolls, Sunstein and Thaler (1998) and Sunstein (2000).
4 See Rachlinski’s (2000) discussion of hindsight bias, Jolls, Sunstein, and Thaler (1998) on information provision issues, McCaffery,
Kahneman, and Spitzer (2000) on framing and punitive damages, and Korobkin (2000) on failures of Coasian bargaining.
5 See the section entitled “Behavioral Economics: Legal Applications” in the Oxford Handbook of Behavioral Law and Economics (2014).
Papers using behavioral psychology to provide alternative perspectives include Halbersberg and Guttel (2014) on psychology and tort law,
Eisenberg (2014) on psychology and contract law, and Sunstein (2014) on regulation.
6 Posner (2003) makes a similar point with respect to traditional law and economics and contract law.
7 My view is consistent with the sentiment expressed in the title of Korobkin’s (2011) paper, “What Comes After Victory for Behavioral Law
and Economics?” and his comment that “the battle to separate the economic analysis of legal rules and institutions from the straightjacket of
strict rational choice assumptions has been won.” (Korobkin, 2011, 1655)
8 An alternative criticism of traditional law and economics is that it fails to consider law as a normative order as in the work of Hans Kelsen.
For a discussion of this point in contrasting Posner versus Kelsen, see Malecka (2016).
9 For purposes of this paper, I use the term “ardent behaviorists” to refer scholars including Cass Sunstein and Richard Thaler.
10 Although he uses the term “heuristics and biases” I believe he is referring to general insights from cognitive psychology which would
include context-dependent preferences and the endowment effect.
11 Mitchell (2014) does not discuss normative or welfare issues in his paper.
12 In this example, we just consider two legal rules: specific performance or expectations damages.
13 Posner (2003) emphasizes that traditional law and economics does not assume the full set of contingent contracts normally analyzed in the
economic contracting literature. As a result, the contracts that are considered in traditional law and economics are not necessarily drawn from
the set of optimal contracts.
14 For a clear discussion of this point, see Seidman (2009, 28-34).
15 See the example of buying a soda on the beach in Thaler (1999, 189)
16 Loss aversion is part of Prospect Theory as developed by Tversky and Kahneman (1981). For a useful discussion, see Wilkinson and Klaes
(2012, 167-171).
17 The discussion here presumes that both out of pocket and opportunity costs are both measurable and comparable. There may be situations
in which opportunity costs of an action are purely subjective. In that case, the analysis would not apply.
18 Korobkin (2000) and Eisenstein (2014) address similar issues.
19 See Sunstein (2014) for a detailed discussion of nudges.
20 Sunstein and Thaler in Nudge (2008) discuss defaults extensively.
21 This logic is pursued in Bernheim et. al. (2015).
22 These settings would include individual choices from menus of opportunities. For a list of some varied examples, see chapter 16 in Thaler
and Sunstein (2008).
23 In another example, behavioral game theory questions whether individuals act as if they follow backward deduction and rule out non-
credible equilibria.
24 See also the extended discussion of these issues in Diamond and Hausman (1994).
25 In an email, Daniel Kahneman warned of a “train wreck looming” in terms of reproducibility of results on priming studies in social
psychology. See Bartlett (2012).
26 This is a contested issue. See McQuillin and Sugden (2012). As discussed below, Bernheim and Rangel (2009) have made progress in
reconciling behavioral economics and normative welfare economics.
27 The difficulties highlighted in this section about preference reversals also apply to approaches based on wealth maximization.
28 Korobkin (2011) suggested that abandoning revealed preferences focuses increased attention on the value of autonomy, the search for
heuristics to understand preferences, and the necessity to understand differences between individuals in acting in ways consistent with their
own welfare.
29 A simple presentation of this idea is in Gruber and Koszegi (2008).
30 Another classic and accessible reference is Schelling (1984). See also Benabou and Tirole (2002).
31 The endowment effect and context dependent preferences in general are examples of preference orderings changing when the economic
environment changes. This is inconsistent with standard economic reasoning that separates preferences from opportunities.
32 For a discussion of the efficacy of nudges and the compatibility of the soft paternalism in nudges and normative individualism, see
Kirchgasser (2017).
Référence électronique
Steven M. Sheffrin, « Behavioral Law and Economics Is Not Just a Refinement of Law and Economics », Œconomia [En ligne], 7-3 | 2017,
mis en ligne le 01 septembre 2017, consulté le 06 juin 2019. URL : http://journals.openedition.org/oeconomia/2640 ; DOI :
10.4000/oeconomia.2640
Auteur
Steven M. Sheffrin
Murphy Institute, Tulane University (New Orleans). smsheffrin@tulane.edu
Droits d’auteur
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Commerciale - Pas de Modification 4.0 International.
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