Academic journal article Law and Contemporary Problems

Foreword Advances in the Behavioral Analysis of Law: Markets, Institutions, and Contracts

Academic journal article Law and Contemporary Problems

Foreword Advances in the Behavioral Analysis of Law: Markets, Institutions, and Contracts

Article excerpt

The collection of articles in this Special Issue is based on an international conference on Advances in the Behavioral Analysis of Law: Markets, Institutions, and Contracts that took place on December 8, 2009 at the University of Haifa Faculty of Law in Israel. The conference addressed cutting-edge legal issues at the intersection of law, economics, and psychology from a diverse set of viewpoints, bringing together scholars engaged in both theoretical and experimental behavioral analyses of law.

The behavioral analysis of law--the application of empirical behavioral evidence to legal analysis--has become increasingly popular in legal scholarship in recent years. (1) This approach provides an explicit account of legally relevant behavior based on empirical research instead of intuition or theory alone. Drawing on the extensive findings of behavioral decision research, the psychology of Judgment and Decision Making (JDM), and related fields, the behavioral approach thus offers an empirically-based middle ground between the theoretical abstractions of the rational-actor model used by traditional law and economics and the implicit, intuitive, and unstructured view of human behavior of traditional legal scholarship. (2)

More specifically, behavioral decision research emphasizes that humans are "boundedly rational"--they possess limited cognitive resources and are affected by motivation and emotion. (3) Sometimes, they engage in formal, effortful, and time-consuming judgment and decision-making. (4) More commonly, however, to survive and function in a complex world, individuals use highly adaptive and often useful mental and emotional heuristics when making judgments under uncertainty; they also rely extensively on situational cues to guide their choices. (5) However, heuristic judgment and cue-dependent choice also lead to systematic and predictable deviations from strictly rational behavior. (6)

Yet despite its many recent contributions, current behavioral-legal scholarship exhibits certain limitations, a number of which are addressed by articles in this issue. For one, only a limited number of legal scholars examined the interaction between behavioral deviations from rational action and the operation of markets, firms, and similar institutions. (7) This shortage stems, at least in part, from a common belief in the power of competitive markets and those business associations that operate within them to overcome deviations from rational action. (8) However, while these institutions may sometimes ameliorate or even eliminate behavioral phenomena, (9) at other times, they exacerbate them, introduce additional deviations from rational action, or simply fail to discipline these deviations from rational action, generating effects that behavioral analyses of the law should account for. (10) Notably, behavioral contributions are now common in disciplines such as management and economics that grapple with closely related questions. (11)

In addition, most behavioral-legal analyses have been based on theoretical applications of extant empirical evidence. (12) Yet while this scholarship already has made significant contributions to the law, there is a pressing need for additional, focused, empirical research of behavioral-legal questions. In particular, legal scholarship often stands to benefit from experimental tests that can directly examine legally-relevant behavior while controlling for potential confounds and selection effects. (13) Such experiments, moreover, can also shed light on the psychological mechanisms underlying the behavioral effects, which may be difficult to discern based on field evidence even when they have important policy implications. (14)

The present issue addresses these challenges by bringing together a unique set of wide-ranging contributions from scholars with behavioral expertise and diverse disciplinary backgrounds in law, psychology, and economics. These contributions direct their nuanced inquiries to the interplay of behavioral phenomena, markets, and other legal institutions; a number of them also employ focused experimental tests to generate new, relevant data. …

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