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

Review of Law and Economics, Forthcoming

Hebrew University of Jerusalem Legal Research Paper

36 Pages Posted: 27 Aug 2019 Last revised: 24 Sep 2019

See all articles by Eyal Zamir

Eyal Zamir

Hebrew University of Jerusalem - Faculty of Law

Date Written: August 26, 2019

Abstract

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. 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, self-serving biases, and 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. Thus, the behavioral studies support many of the predictions of standard economic analysis, without committing to a simplistic portrayal of human motivation. The article reviews the psychological findings, explains how they provide a sounder, complementary foundation for 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, Refounding Law and Economics: Behavioral Support for the Predictions of Standard Economic Analysis (August 26, 2019). Review of Law and Economics, Forthcoming, Hebrew University of Jerusalem Legal Research Paper , Available at SSRN: https://ssrn.com/abstract=3442740

Eyal Zamir (Contact Author)

Hebrew University of Jerusalem - Faculty of Law ( email )

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