66 Pages Posted: 9 Jan 2001
A flood of recent scholarship explores legal implications of seemingly irrational behaviors by invoking cognitive psychology and notions of bounded rationality. In this article, I argue that advances in behavioral biology have largely overtaken existing notions of bounded rationality, revealing them to be misleadingly imprecise - and rooted in outdated assumptions that are not only demonstrably wrong, but also wrong in ways that have material implications for subsequent legal conclusions. This can be remedied. Specifically, I argue that behavioral biology offers three things of immediate use. First, behavioral biology can lay a foundation for both revising bounded rationality and fashioning a solid theoretical basis for understanding and predicting many human irrationalities. Second, a principle we may derive from the fundamentals of behavioral biology, which I term "time-shifted rationality," can help us to usefully disentangle things currently lumped together under the label of bounded rationality. Doing so suggests that some seeming irrationalities are not, in fact, the product of conventional bounded rationality but are instead the product of a very different phenomenon. As a consequence and by-product of this analysis, it is possible to reconcile some of the supposed irrationalities with an existing rationality framework in a new, more satisfying, and more useful way. Third, behavioral biology affords the raw material for deriving a new principle, which I term "the law of law's leverage," that can help us to better understand and predict the effects of law on human behavior. Specifically, it can help us to anticipate the comparative sensitivities of various human behaviors to legal changes in incentives. That is, it enables us to anticipate differences in the slopes of demand curves for various law-relevant behaviors. This law of law's leverage therefore can afford us new, coherent, and systematic power in predicting the comparative costs, to society, of attempting to change behaviors through legal means. And the principle also provides a new and powerful tool for explaining and predicting many of the existing and future architectures of legal systems.
Suggested Citation: Suggested Citation
Jones, Owen D., Time-Shifted Rationality and the Law of Law's Leverage: Behavioral Economics Meets Behavioral Biology. Northwestern University Law Review, Vol. 95, 2001. Available at SSRN: https://ssrn.com/abstract=249419 or http://dx.doi.org/10.2139/ssrn.249419