How the New Economics Can Improve Discrimination Law, and How Economics Can Survive the Demise of the 'Rational Actor'
60 Pages Posted: 3 Apr 2009 Last revised: 2 Apr 2015
Date Written: March 25, 2009
Much employment discrimination law is premised on a purely money-focused “reasonable” employee, the sort who can be made whole with damages equal to lost wages, and who does not hesitate to challenge workplace discrimination. This type of “rational” actor populated older economic models but has been since modified by behavioral economics and research on happiness. Behavioral and traditional economists alike have analyzed broad employment policies, such as the wisdom of discrimination statutes, but the devil is in the details of employment law, and on critical damages-and-liability issues the Supreme Court and litigators face regularly, the law essentially ignores the lessons of behavioral economics and the affective sciences. This Article analyzes particularly damages, employer duties, and employee duties. This Article also analyzes broad implications of behavioral and happiness research for law and economics. This Article thus offers a half-full/half-empty assessment of the usefulness of economics, and of behavioral and happiness research, to law. It sounds a cautionary note against using social science to assess grand legal policies, but a hopeful note that such research can improve decision-making by judges, firms, and individuals.
Keywords: behavioral economics, positive psychology, happiness, damages, remedies, affirmative defenses, discrimination, harassment, diversity, employment, Faragher, Ellerth, Kolstad
JEL Classification: J64, J70, J71, J78, J79, K31, K41, K42
Suggested Citation: Suggested Citation