Stumble, Predict, Nudge: How Behavioral Economics Informs
Law and Policy

40 Pages Posted: 21 Jan 2009  

Orly Lobel

University of San Diego School of Law

On Amir

University of California, San Diego (UCSD) - Rady School of Management

Date Written: January, 13 2009

Abstract

Research in the field of behavioral economics indicates that humans stumble in their decisionmaking in predictable ways that can often be corrected by a gentle nudge from the appropriate regulatory authority. Two new books -- Dan Ariely's Predictably Irrational and Richard Thaler and Cass Sunstein's Nudge -- recount the findings of behavioral research on predictable patterns in human decisionmaking and lay the foundation for regulation through choice architecture that recognizes these human stumbles. In this Review Essay, we provide a critical account of remaining gaps in behavioral economics research and suggest that some types of behavioral insights may be better translated into law and policy reforms than others. We further argue that Nudge's concept of libertarian paternalism both understates and exaggerates the jurisprudential and policy implications of regulatory innovation. While key insights from the behavioral field may lead to effective regulation systems with minimal intervention, these systems entail costs, have distributional effects, solve macro coordination problems, and are inevitably value driven. Moreover, policy nudges serve merely as a first stage of sequenced regulation where, inevitably, more coercive measures are required in later stages. The idea of choice architecture is then related to the growing body of regulatory studies collectively termed new governance. We conclude with a call for a more nuanced account of the range of mechanisms as well as the limits, costs, and consequences of applying lessons from the field of behavioral economics to law.

Keywords: behavioral economics, psychology and the law, administrative law, public policy, regulation, social norms, incentives and motivation, health law, new governance

JEL Classification: A11, A12, D11, D12, D18, D80, E21, I10, M31, K00

Suggested Citation

Lobel, Orly and Amir, On, Stumble, Predict, Nudge: How Behavioral Economics Informs Law and Policy (January, 13 2009). Columbia Law Review, Vol. 108, 2009; San Diego Legal Studies Paper No. 09-006. Available at SSRN: https://ssrn.com/abstract=1327077

Orly Lobel (Contact Author)

University of San Diego School of Law ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

HOME PAGE: http://home.sandiego.edu/%7Elobel/

On Amir

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
858-534-2023 (Phone)
858-534-0745 (Fax)

HOME PAGE: http://management.ucsd.edu/faculty/directory/amir/

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