Law for the Common Man: An Individual-Level Theory of Values, Expanded Rationality, and the Law

By Licht, Amir N. | Law and Contemporary Problems, Spring 2011 | Go to article overview

Law for the Common Man: An Individual-Level Theory of Values, Expanded Rationality, and the Law


Licht, Amir N., Law and Contemporary Problems


I

INTRODUCTION

What does the law mean to the common person? Such a broad question could be answered in more than one way, depending on one's vantage point, disciplinary background, and so forth. From an economic-analysis perspective, an individual actor would consider the law as a system of incentives. In this view, incentives provide--indeed, constitute--reasons for action. The focus thus shifts from incentives in isolation to the mechanism that engenders such incentive-sensitive behavior. In the traditional neoclassical economic account, individuals respond to incentives with a motivation to maximize their expected utility--also known as rational preferences. Economic analysis of law that subscribes to the rationality assumption thus treats the law as a price system of sorts.

That the traditional rationality assumption fails systematically in predicting people's behavior in important circumstances is not much in dispute anymore. Research on bounded rationality in behavioral economics harnesses insights primarily from cognitive psychology to suggest directions for developing an organizing framework for non-standard preference formation. This research addresses major aspects in which actual behavior diverges from the behavior predicted by the traditional rationality-based model. However, because economics still lacks a general theoretical account that could replace the rational preference workhorse, legal applications of behavioral economics tend to be more specific than general, at least at the level of generality reflected in the question that opens this article: What does the law mean to the common person?

This article makes an admittedly bold attempt at outlining an analytical framework for addressing this question. Instead of looking at the legal implications of bounded rationality--an exercise highly worthy in its own right--this article advances a theory of expanded rationality. This theory retains the element of rationality in that people respond to incentives in an attempt to attain utility, and it does not question the observation that decision-making is often bounded due to various factors. The main thrust of the present theory is to expand the concept of personal utility such that it comprises personal values. This theory might be useful for economics in general, but it could be particularly beneficial for elaborating law-and-economics accounts of legal issues that have been restricted by the traditional model of rationality.

Defined as conceptions of the desirable, values guide the way individuals select actions, evaluate people and events, and explain or justify their actions and evaluations. Values thus operate as arguments in individuals' personal utility functions, underlie the construction of preferences, and provide reasons for reason-based choice. The present theory expands the conception of rationality by incorporating a set of motivational goals that is richer than the standard depiction of self-interestedness, yet avoids tautology. This expanded, values-based account of preferences and incentives lends itself to illuminating fundamental questions about legal design and the role of law in society.

The remainder of this article describes the theoretical underpinnings of the expanded rationality model and its application to the law. Part II provides a brief introduction to the theory of values as it has developed in psychology. Part III reviews two central strands in the economic literature on rationality and demonstrates how the theory of values can serve to develop a general account of expanded rationality. Part IV applies this theory to four fundamental legal problems: (1) the link between values and the content of laws, (2) the role of values in law abidingness, (3) the effect of value diversity in groups on legal design, and (4) the crucial aspect of value conflict in the application of law.

II

VALUES: CONCEPTUALIZING THE DESIRABLE

A. …

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