Abstract
Behavioural law and economics is one of the two most significant developments currently going on in legal scholarship. In this essay, I seek to describe, first, why behavioural law and economics is so important and to give a brief example of how it has altered the law-and-economic analysis of one significant area of substantive law—criminal law and punishment. Second, I discuss some criticisms of behavioural law and economics, finding that some of those criticisms have merit and raise serious issues that legal scholars should investigate further. I describe two recent articles that find a common behavioural policy prescription of using “nudges” to be not just ineffectual but damaging. Finally, I speculate on some differences between the structure of legal faculties and prevailing scholarly practices in Europe and North America that may have an impact on how quickly legal scholars in those two areas address the open questions in behavioural law and economics.
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Notes
- 1.
The other important trend in legal scholarship, one closely related to behavioural law and economics, is empirical legal studies.
- 2.
Pessendorf 2006. There are, of course, significant exceptions to this characterization. John List at the University of Chicago, Matthew Rabin at the University of California, Berkeley, Sendhil Mullainathan at Harvard, and others have been prominent in their use of behavioural economics. I also believe that it is true that European economists have been more congenially disposed toward behavioural economics than have North American economists.
- 3.
The only exception to this statement of which I am aware is Frank 2014.
- 4.
I recall that when I first began presenting papers to law faculties in the early 1980s and would begin my presentation by saying that I would be assuming rational choice by decisionmakers, someone would ask some version of the question, “Who are these rational decisionmakers you’re talking about?”
- 5.
Thomas Kuhn 1996.
- 6.
There is, of course, a downside to this willingness. The field must develop a sense for what innovations have promise and make sense and which do not. The experience of law with one innovation of the late 1980s and early 1990s—critical legal studies—illustrates that law is able to make this distinction between promising and unpromising innovations.
- 7.
Garoupa and Ulen 2008.
- 8.
Another Newton quote that is apt: “Men build too many walls and not enough bridges.” Law seems to have been building bridges to other disciplines more than almost any other social science, with the predictable result that there is a very high level of intellectual fervor in legal scholarship, at least in North America.
- 9.
In European terms, law and economics seems to be associated with neo-liberal political views. In U.S. terms, the association would be said to be with conservative or neo-conservative politics.
- 10.
The expected costs of crime are the product of the probabilities of detection, arrest, and conviction and the value of the sanctions imposed on the guilty criminal. Becker implied that, all other things being equal, it was more efficient to raise those expected costs by raising the value of the sanction rather than by raising the probabilities of detection, arrest, and conviction.
- 11.
Through the 1980s state and federal sentencing guidelines moved from a system of indeterminate sentencing (under which judges had a range within which to sentence a convicted criminal for a given crime, with the judge having discretion as to where within that range to place any given criminal; additionally, parole boards had discretion to release convicted criminals who had not completed their sentence but had exhibited some desirable behavior during imprisonment) to one of determinate sentencing (under which judges had relatively little discretion in sentencing, and parole boards virtually went out of business).
- 12.
The very large numbers of prisoners in U.S. jails and prisons peaked in 2007 and has declined slightly since then.
- 13.
- 14.
Donohue and Levitt attributed half of that 50 % explanation to the fact that there were fewer 18-year-old men in the population as of 1991 and another half to the fact that the young men born in the years after 1973 were less likely to commit crime than the young men who were not born. Cooter and Ulen 2012, Ch. 12.
- 15.
Raphael and Stoll 2014.
- 16.
Raphael and Stoll 2014, p. 17.
- 17.
Robinson and Darley 2004.
- 18.
Barbarino and Mastrobuoni 2014.
- 19.
- 20.
See Donohue and Wolfers 2005.
- 21.
Cooter 2011.
- 22.
Thaler and Sunstein 2008.
- 23.
- 24.
Becker 1962.
- 25.
- 26.
Mitchell and Klick 2006.
- 27.
Mitchell 2002a, p. 73.
- 28.
Mitchell 2009.
- 29.
This topic is one of the central concerns in Kahneman 2011. Kahneman distinguishes between System I thinking, which is quick, intuitive, and capable of generating a rapid response, and System II thinking, which is slow, deliberative, balanced, and interested in getting the right response. There is a popular literature, Gladwell 2005, and a scholarly literature, Gigerenzer 2007, that is far more well-disposed toward intuition, as being a form of crystallized experience.
- 30.
Mitchell and Klick 2006.
- 31.
- 32.
Vandenbergh et al. 2011; Robinson and Hammit 2011; Sunstein 2013. The central behavioural finding that argued in favor of changing the default as a “nudge” was the discovery that people do not typically move away from a default position; those defaults, in the parlance of the literature, are said to be “sticky.” The results of changing the default can be large, without much apparent change in the well-being of those subject to the default. So, for example, the choice between an opt-out regime for donating one’s organs for transplantation (the organs are presumed not to be available for transplantation unless the donor takes steps to opt out of donation) and an opt-in system (in which the donor’s organs are presumed not to be available unless the donor takes steps to opt in to the transplantation system) may seem to be inconsequential. But the differences are profound: The U.S. has an opt-in system and only about 28 % of people take steps to do so. By contrast, in the six European countries that have an opt-out system, the donation rates vary between 85 and 99 + percent.
- 33.
Bubb and Pildes 2014.
- 34.
Schwartz Center for Economic Policy Analysis, Department of Economics, The New School 2012. Retirement account balances by income: Even the highest earners don’t have enough. http://www.economicpolicyresearch.org/guaranteeing-retirement-income/528-retirement-account-balances-by-income-even-the-highest-earners-dont-have-enough.html. The more detailed figures are even more startling. For the two lowest personal income quartiles (those with annual incomes of less than $ 27,500), the mean total savings for those who are 50–64 years of age in the lowest quartile are $ 16,034, with a median of $ 0; for those who are 50–64 in the next highest quartile, the median total savings are $ 21,606, with a median of $ 0. For those in the highest quartile (annual personal income of greater than $ 52,201) the mean total savings are $ 105,012, with a median of $ 52,000. For the purposes of rough accounting, most financial planners suggest total savings equal to 20 times one’s annual income on the eve of retirement as a prudent amount.
- 35.
Bubb and Pildes 2014, p. 7.
- 36.
Bubb and Pildes consider two additional instances in which individuals make decisions that are either sub-optimal for themselves or for society or both and in which nudges have been recommended as corrective but do not work.
- 37.
Willis 2013.
- 38.
When I joined the law school faculty in 1982, I was the first person to have a Ph.D. (and only a Ph.D.) to join that faculty since the founding of the law school in 1897.
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Acknowledgment
I want to thank Avishalom Tor and Klaus Mathis for organizing the Lucerne conference and inviting me to attend. I also want to thank Julia Wetzel, Ariel Steffen, and the IT people at Lucerne and Tyler Hunter at Illinois for arranging for me to speak to the conference by video.
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Ulen, T. (2015). European and American Perspectives on Behavioural Law and Economics. In: Mathis, K. (eds) European Perspectives on Behavioural Law and Economics. Economic Analysis of Law in European Legal Scholarship, vol 2. Springer, Cham. https://doi.org/10.1007/978-3-319-11635-8_1
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