Reinforcing Law and Economics: Behavioral Support for the Predictions of Standard Economic Analysis

33 Pages Posted: 20 Apr 2018 Last revised: 1 May 2018

See all articles by Eyal Zamir

Eyal Zamir

Hebrew University of Jerusalem - Faculty of Law

Date Written: April 20, 2018

Abstract

Economic analysis has had a powerful influence on legal theory and policymaking. Based on the premise that people are rational maximizers of their own utility, economic analysis has a fairly successful record in correctly predicting human behavior in all spheres of life. This success is puzzling, given behavioral findings that show that people do not necessarily seek to maximize their own utility. Drawing on studies of motivated reasoning and self-serving biases, including recent advances in behavioral ethics, this article offers a new behavioral foundation for the predictions of economic analysis. The behavioral studies reveal how automatic and mostly unconscious processes lead well-intentioned people to make self-serving decisions (even when this entails violating moral, social, or legal norms). Thus, the behavioral studies support many of the predictions of standard economic analysis, without committing to an overly simplistic and cynical portrayal of human motivation. The article reviews the relevant psychological findings, explains how they provide a complementary, sounder foundation for much of economic analysis, and discusses their implications for legal policymaking.

Keywords: agency problem, positive economics, normative economics, behavioral law and economics, bounded ethicality, behavioral ethics, motivational rationality, self-serving biases, motivated reasoning

JEL Classification: A13, D00, D03, D64, K00

Suggested Citation

Zamir, Eyal, Reinforcing Law and Economics: Behavioral Support for the Predictions of Standard Economic Analysis (April 20, 2018). Hebrew University of Jerusalem Legal Research Paper No. 18-17. Available at SSRN: https://ssrn.com/abstract=3165904 or http://dx.doi.org/10.2139/ssrn.3165904

Eyal Zamir (Contact Author)

Hebrew University of Jerusalem - Faculty of Law ( email )

Mount Scopus
Mount Scopus, IL 91905
Israel
+972 2 582 3845 (Phone)
+972 2 582 9002 (Fax)

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