Law 165 - Behavioral Law and Economics
Richard C. Maxwell Professor of Law
J.D. Stanford, 1994
“Law and economics” analysis is normatively committed to using legal policy to promote the efficient production and allocation of resources and consequently the maximization of social welfare. In order use law to promote efficiency, analysts must make assumptions about how actors will respond to the incentives created by legal rules. For this purpose, “traditional” law and economics analysis borrows from microeconomics a set of assumptions often described as “rational choice theory,” which supposes that actors can and do maximize the pursuit of their subjective utility or their self-interest when responding to incentives that law creates. “Behavioral” law and economics relies on a large and growing body social science research that indicates individual behavior often fails to conform with the assumptions of rational choice theory. Real people, it turns out, use a variety of mental heuristics, or rules of thumb, when they attempt to understand the world, determine their preferences, and choose their behaviors.
Behavioral law and economics research attempts to determine what legal policy choices are most efficient given this richer, more realistic, but also more complicated understanding of human behavior. This Modes of Legal Inquiry course will introduce students to the methodological approach of behavioral law and economics, how it differs from traditional law and economics, and critiques of the movement.