A Positive Psychological Theory of Judging in Hindsight

Abstract:     
Past events frequently seem inevitable and predictable after they unfold -- a tendency that cognitive psychologists have labeled the "hindsight bias." This bias affects judgments of liability in the legal system. For example, by making adverse outcomes seem more predictable (and hence avoidable) than they really were, defendants can be held liable for adverse outcomes that hey could not have foreseen. In effect, judgments of liability made under a negligence standard resemble those made under a standard of strict liability. Courts, however, have historically shown an awareness of the hindsight bias. When possible, courtshave developed methods of making judgments that avoid reliance on the hindsight bias. These adaptations include barring after-acquired information from the decision-making process and carefully enforcing any ex ante understanding about liability that parties may have had. When no such mechanisms are available, the courts choose sensibly among second-best solutions. The legal system is thus shown to incorporate and adapt to this limitation on human judgment.

Accepted Paper Series