52 Pages Posted: 6 Mar 2017
Date Written: March 2017
Just as Newtonian mechanics breaks down when we look at the constituent pieces of our universe—subatomic particles—neoclassical economics breaks down when we look at the constituent pieces of our society—individual people. At the scale of subatomic particles, quantum mechanics provides new foundations for understanding the physical world; at the scale of individual decisionmaking, behavioral economics promises new foundations for understanding the social, economic, and legal worlds. As this Article explains, this analogy between Newtonian and quantum physics, on the one hand, and neoclassical and behavioral economics, on the other hand, has much to reveal about law and economics.
With the help of numerous examples of key finding in behavioral law and economics, I take three principles from quantum mechanics (the uncertainty principle, the correspondence principle, and the quantum principle) and show how analogous principles in economics help illuminate the future trajectory of law and economics. I then seek to accelerate this trajectory by proposing an agenda for strengthening behavioral law and economics through a stronger grounding in theory, and specifically a “quantum” theory of decisionmaking.
Along the way, the analysis leads me to challenge some common misconceptions about law and economics: behavioral and neoclassical approaches to law and economics are not rivals, but partners; simplistic and artificial assumptions about human behavior remain a problem in law and economics, but most acutely in behavioral law and economics; and the notion that neoclassical economics promotes a deregulatory agenda and behavioral economics promotes a pro-regulatory agenda is, as often as not, exactly backwards.
Keywords: law and economics, behavioral economics, neoclassical economics, experiments, theory
JEL Classification: K00
Suggested Citation: Suggested Citation
Hubbard, William H. J., Quantum Economics, Newtonian Economics, and Law (March 2017). University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 799. Available at SSRN: https://ssrn.com/abstract=2926548