Research Guides : Behavioral Law and Economics: SSRN

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Jeffrey J. Rachlinski's Scholarly Papers Professor of Law Cornell Law School
Tess Wilkinson‐Ryan's Scholarly Papers Assistant Professor University of Pennsylvania Law School
Thomas S. Ulen's Scholarly Papers Swanlund Chair, Director, Illinois Program in Law and Economics University of Illinois College of Law

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SSRN - Behavioral Law And Economics

The Proper Scope of Behavioral Law and Economics Behavioral law and economics applies the conceptual tools of behavioral economics to the analysis of legal problems and legal intervention. These models, and the experiments to test them, assume an institution free state of nature. In modern societies, the law’s subjects never see this state of nature. However, a rich arrangement of informal and formal institutions creates generalized trust. If individuals are sufficiently confident that nothing too bad will happen, they are freed up to interact with strangers as if they were in a state of nature. This willingness dramatically reduces transaction cost and enables division of labor. If generalized trust can be assumed, simple economic models are appropriate. But they must be behavioral, since otherwise individuals would not want to run the risk of interaction.
Behavioral Analysis of Commercial Law: Corporate Law, Securities Regulation, and Antitrust The chapter critically surveys the behavioral analysis of commercial law. It begins by examining the preliminary question of whether bounded rationality can persist in well-functioning, highly competitive markets. As the theoretical analysis and empirical evidence demonstrate, irrational behavior is present even in such settings. The chapter goes on to discuss the implications of behavioral analysis for key issues within corporate law, securities regulation, and antitrust law (i.e., competition law).
Behavioral Law and Economics: Administrative, Constitutional, and International Law In the past few decades, economic analysis of law has been challenged by a growing body of experimental and empirical studies that attest to prevalent and systematic deviations from the assumptions of economic rationality. While these insights were initially perceived as antithetical to standard economic and legal-economic analysis, over time they have been largely integrated into mainstream economic analysis, including economic analysis of law. Moreover, the impact of behavioral insights has long since transcended purely economic analysis of law: in recent years, the behavioral movement has become one of the most influential developments in legal scholarship in general. While there have been some behavioral analyses of constitutional and administrative law issues, the impact of behavioral studies on public and international law — with the notable exceptions of regulation techniques and judicial decision-making — has been rather limited compared to other legal spheres. However, recent studies are gradually closing this gap. In this Chapter (which will be part of a forthcoming textbook-treatise on behavioral law and economics), we critically survey the behavioral analysis of public and international law, including studies of governmental institutions and rule-making, citizens’ judgments and choices, human rights (including issues in freedom of speech, the fight against terrorism, and affirmative action), and international law.
Alternative Behavioral Law and Economics This chapter considers the psychological, methodological, and normative paths taken by behavioral law and economics ("BLE") and alternative paths that BLE might have taken, and might still take. The counterfactual BLE imagined here stresses the B in BLE, with behavioral approaches to legal problems being the focus rather than advocacy of any particular basic model of human cognition and motivation to compete with L&E’s dominant model. This change in focus would give priority to empirical studies in which particular legal institutions and specific legal tasks are simulated or studied in situ rather than to studies of abstract and general judgment and decision-making problems that may provide more theoretical bang but have less applied payoff in specific legal contexts.
A Behavioral Law and Economics Analysis of Property
Overcoming the Knowledge Problem in Behavioral Law and Economics: Uncertainty, Decision Theory, and Autonomy
Behavioral Economics and Private International Law
The Behavioral Divide. A Critique of the Differential Implementation of Behavioral Law and Economics in the US and the EU
Misbehavioral Law and Economics: Separating and Pooling in Responses to Consumer Financial Mistakes
An Assessment of Behavioral Law and Economics Contentions and What We Know Empirically About Credit Card Use by Consumers
Behavioral Economics and Tort Law
The Next Generation of Behavioural Law and Economics
Behavioural Law and Economics: Regulatory Reform of Consumer Credit and Consumer Financial Services
Behavioral Law and Economics: Empirical Methods
Behavioral Law and Economics: Its Origins, Fatal Flaws, and Implications for Liberty

SSRN - Behavioral Law and Economics

Reinforcing Law and Economics: Behavioral Support for the Predictions of Standard Economic Analysis Economic analysis has had a powerful influence on legal theory and policymaking. Based on the premise that people are rational maximizers of their own utility, economic analysis has a fairly successful record in correctly predicting human behavior in all spheres of life. This success is puzzling, given behavioral findings that show that people do not necessarily seek to maximize their own utility. Drawing on studies of motivated reasoning and self-serving biases, including recent advances in behavioral ethics, this article offers a new behavioral foundation for the predictions of economic analysis. The behavioral studies reveal how automatic and mostly unconscious processes lead well-intentioned people to make self-serving decisions (even when this entails violating moral, social, or legal norms). Thus, the behavioral studies support many of the predictions of standard economic analysis, without committing to an overly simplistic and cynical portrayal of human motivation. The article reviews the relevant psychological findings, explains how they provide a complementary, sounder foundation for much of economic analysis, and discusses their implications for legal policymaking.
Justice Begins Before Trial: How to Nudge Inaccurate Pre-Trial Rulings Using Behavioral Law and Economic Theory and Uniform Commercial Laws Injustice in criminal cases often takes root before trial begins. Overworked criminal judges must resolve difficult pre-trial evidentiary issues that determine the charges the State will take to trial and the range of sentences the defendant will face. Wrong decisions on these issues often lead to wrongful convictions. But as behavioral law and economic theory suggests, judges who are cognitively busy and receive little feedback on these topics from appellate courts rely upon intuition, rather than deliberative reasoning, to resolve these questions. This leads to inconsistent rulings, which prosecutors exploit to expand the scope of evidentiary exceptions that almost always disfavor defendants. Such intuitive, inconsistent decision-making thereby undermines criminal justice before trial even starts. In this Article, I argue that criminal judges can rely on an alternative model to decide an especially vexing pre-trial evidentiary issue—the admissibility of a co-conspirator’s hearsay statement at the defendant’s trial. Judges can look to principles in uniform commercial laws to resolve this issue in a more deliberative fashion. Uniform commercial laws predictably, accurately, and simply allocate individual liability for the actions of opaque, profit-driven commercial organizations. Those laws can likewise allocate individual liability amongst members of analogous conspiratorial organizations. Because those laws are also reducible to decision trees and checklists that encourage deliberative reasoning while still generating relatively fast decisions, judges can rely upon them to produce fair results without bringing their dockets to a standstill. I provide several examples in which illicit organizations are sufficiently analogous to commercial organizations for judges to apply uniform commercial laws when resolving co-conspirator hearsay issues. When judges do so, they will check the growth of anti-defendant evidentiary exceptions. Critically, they will also increase the likelihood of just outcomes in criminal cases once the trial begins.

SSRN - Decision Making

Arbitral Decision-Making: Legal Realism and Law & Economics As the social impact and role of international arbitration receives increasing attention, one central theme in this conundrum gains prominence: how do arbitrators decide cases? What influences arbitral decision-making? With the progressive opening of scholarship in the field to interdisciplinary approaches and studies going beyond doctrinal work, the question often takes the following form: do arbitrators apply the law, or do they make decisions based on something else – personal preferences, political biases, etc? When empirical studies fail to find significant statistical evidence of the role of extra-legal factors in their decision-making, the conclusion is drawn that arbitrators do indeed nothing else than apply the law. This article argues that the question so posed is an argumentative fallacy. Using the epistemology of legal realism and a simple methodology of law & economics, this article maintains that arbitrators, like every dispute resolver, are likely to always rely on both legal and extra-legal factors. It focuses on identifying, in the abstract, possible extra-legal factors which may amount to incentives and constraints placed by the current ecosystem of arbitration on arbitral decision-making.

SSRN - Behavioral Criminal Law and Economics

Behavioral Criminal Law and Economics A behavioral economics literature identifies how behaviorally-derived assumptions affect the economic analysis of criminal law and public law enforcement. We review and extend that literature. Specifically, we consider the effect of cognitive biases, prospect theory, hedonic adaptation, hyperbolic discounting, fairness preferences, and other deviations from standard economic assumptions on the optimal rules for deterring potential offenders and for regulating (or motivating) potential crime victims, legislators, police, prosecutors, judges, and juries.
Social Stigma, Heuristics and Criminal Law This paper explores under what conditions social stigma exists as an additional sanction in criminal law from a behavioral law and economics perspective. A distinction is made between the court as an institution specialized at discovering and assigning blame and the rest of the society that relies on judgment heuristics in assigning the informal sanction. When the court finds that an individual has violated a particular legal standard, the rest of the society updates their information about the particular personality predisposition of the individual and assigns to him the predispositional type of the set of violators. It is shown that a criminal conviction carries an additional social stigma depending on the legal standard, the population variance, and the beliefs of the society. This happens in a separating equilibrium where the best strategy of each type confirms the beliefs of the rest of society with regards to the set of individual violators. Within this range, it is also shown that the substitutability between the fine and the probability of conviction also depends on the variance which is different from what the Becker model predicts. Thus, while it is the rest of the society that imposes the social sanction, the social planner can influence it indirectly. It shows that the complementarity between law and informal sanction lies on making the act observable to the rest of society and influencing the society's belief function.
Does Crime Pay? An Economic Analysis of Criminal Behavior This Thesis examines issues of crime and law enforcement from an economic standpoint, focusing on the incentives for criminal behavior and the efficiency of various law enforcement policies. The economic approach to criminal behavior supposes that at least some portion of criminal behavior is rational and responds to certain incentives in a predictable way, which would have several important implications for law enforcement and other aspects of public policy. This analysis has both microeconomic and macroeconomic components.