What Comes After Victory for Behavioral Law and Economics?
19 Pages Posted: 21 Mar 2011 Last revised: 27 Mar 2011
Date Written: March 15, 2011
The battle to separate the economic analysis of legal rules and institutions from the straightjacket of strict rational choice assumptions has been won by the proponents of behavioral law and economics. With the revealed preferences assumption of neoclassical economics - that individual behavior necessarily maximizes subjective expected utility - discarded, what comes next for the discipline of law and economics? The article argues that theorists should turn their attention to a series of philosophical and methodological problems that surround the measurement of subjective expected utility: (1) the need to recognize and value autonomy for its own sake, separate from its ability to enhance utility; (2) the need to advance a theory of subjective utility that takes into account the use of heuristics in the construction of preferences as well as in understanding facts and judging probabilities; and (3) the need to recognize and confront the consequences of individual difference in the extent of bounded rationality.
Keywords: behavioral law and economics, heuristics, bounded rationality, preference construction, libertarian paternalism
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