Living with Hindsight Bias

26 Pages Posted: 19 Dec 2010

Date Written: December 19, 2010

Abstract

The reasonable man, through the Law and Economics movement, has recently taken up the features of homo economicus, the rational, self-interested maximizer of economic theory. It is increasingly apparent that most people, most of the time, do not evaluate their own utility or make decisions in the way economic models predict. Our reasonable man and homo economicus are looking more aspirational every day. This paper examines how heuristics and biases influence ex post jury evaluations of whether a defendant arrived at the same assessment of risks as a reasonable person would, or whether a party should have made a different decision to prevent an adverse outcome. In particular, this paper will discuss the hindsight bias, one area where recent insights into rationality and decision-making raise especially severe concerns about jury judgments. This paper will ask why we trust ex-post evaluations when it is apparent that judges and juries will systematically produce holdings based on assessments that don’t, and possibly can’t, replicate the historical judgments they are evaluating in a way that legitimates second-guessing those decisions. This paper will argue that, despite valid concerns, drastic changes in jury deliberation and scope of responsibility are inadvisable. In addition, it will explain how the purported irrationality of hindsight bias suffers from a lack of clarity about what constitutes rationality or irrationality in a jury system. Finally, it will argue that incremental changes should be made through procedural improvements. The legal system’s adaptation to the hindsight bias can set a precedent for further improvements inspired by developments in behavioral science. Unlike the wholesale importation of homo economicus by Law and Economics, the legal system needs to evaluate potential reforms in light of the complex and interrelated goals and safeguards built into the system.

Keywords: hindsight bias, jury, law and economics, behavioral law and economics

JEL Classification: K00, K40

Suggested Citation

Nowlan, Aileen Elizabeth, Living with Hindsight Bias (December 19, 2010). Available at SSRN: https://ssrn.com/abstract=1728475 or http://dx.doi.org/10.2139/ssrn.1728475

Aileen Elizabeth Nowlan (Contact Author)

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

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