Imagine that you have $100 that you must choose to allocate between yourself and someone you never met and will never meet again in the future. How much will you keep, and how much will you give to that someone else? Orthodox economic analysis of law claims that rational, self-interested utility-maximizing people will keep the entire sum for themselves. Empirical studies, in contrast, show that people do give a non-negligible portion of their money to the someone else we have imagined. If this and many other so-called “anomalies” discovered by social scientists in recent years are correct and robust, then orthodox economic analysis of law fails to be a relevant positive theory. People are not always “rational” in the sense that economists suppose, but it does not follow that people’s behavior is unpredictable or senseless. In this seminar we explore how amending the traditional economic analysis of law with insights drawn from cognitive psychology and behavioral economics may change our perspectives on many important legal issues in such areas as environmental protection, tort law, contract law, tax law, and more. This new field of law, which adds complexity to the traditional paradigm, may improve our ability to assess the actual effects of law and to understand the role of law in society.
Background in economics, economic analysis of law, or psychology is neither required nor assumed. The main source of readings to be used in the seminar is “Behavioral Law & Economics”, (Cass. R. Sunstein, Ed), Cambridge University Press, 2000, and supplemental readings will also be used.