Sticky expectations: Responses to persistent over-optimism in marriage, employment contracts, and credit card use

Notre Dame Law Review

Volumn 84, Issue 2, 2009, Pages 733-791

  Williams, Sean Hannon ^a  

^a UNIVERSITY OF TEXAS SCHOOL OF LAW   (United States)

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EID: 62149134486     PISSN: 07453515     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (300)

1. Neil D. Weinstein, Unrealistic Optimism About Future Life Events, 39 J. PERSONALITY & Soc. PSYCHOL. 806, 806 (1980).
2. See Pauline T. Kim, Norms, Learning, and Law: Exploring the Influences on Workers' Legal Knowledge, 1999 U. ILL. L. REV. 447, 465.
3. Lynn A. Baker & Robert E. Emery, When Every Relationship Is Above Average: Perceptions and Expectations of Divorce at the Time of Marriage, 17 L. & HUM. BEHAV. 439, 443 (1993).
4. See id.
5. See Richard V. Burkhauser et al., Wife or Frau, Women Do Worse: A Comparison of Men and Women in the United States and Germany After Marital Dissolution, 28 DEMOGRAPHY 353, 356 tbl.1, 358 (1991).
6. See Amos Tversky & Daniel Kahneman, Advances in Prospect Theory: Cumulative Representation of Uncertainty, 5 J. RISK & UNCERTAINTY 297, 298, 306, 312 (1992).
7. Daniel Kahneman & Amos Tversky, Conflict Resolution: A Cognitive Perspective, in CHOICES, VALUES, AND FRAMES 473, 483-84 (Daniel Kahneman & Amos Tversky eds., 2000).
8. The traditional assumption in Law and Economics literature has been that legal changes beget accurate changes in people's expectations. See RICHARD A. Pos-NER, ECONOMIC ANALYSIS OF LAW 4 (6th ed. 2003) ("The concept of man as a rational maximizer of his self-interest implies that people respond to incentives-that if a person's surroundings change in such a way that he could increase his satisfactions by altering his behavior, he will do so."). For a discussion of specific proposals aimed at changing expectations, see infra Parts III.A.4, III.B.4, III.C.4.
9. Baker & Emery, supra note 3, at 443.
10. See Sanjay Srivastava et al., Optimism in Close Relationships: How Seeing Things in a Positive Light Makes Them So, 91 J. PERSONALITY & Soc. PSYCHOL. 143, 151 (2006).
11. See GUIDO CALABRESI, THE COSTS OF ACCIDENTS 26 (1970).
12. Weinstein, supra note 1, at 810.
13. N.C. Higgins et al., The Controllability of Negative Life Experiences Methates Unrealistic Optimism, 42 Soc. INDICATORS RES. 299, 319 (1997).
14. See Linda Babcock & George Loewenstein, Explaining Bargaining Impasse: The Role of Self Serving Biases, 11 J. ECON. PERSP. 109, 110 (1997).
15. See Matthew W. Kreuter & Victor J. Strecher, Changing Inaccurate Perceptions of Health Risk: Results from a Randomized Trial, 14 HEALTH PSYCHOL. 56, 57, 61, 63 (1995).
16. Babcock & Loewenstein, supra note 14, at 115.
17. See Baker & Emery, supra note 3, at 443.
18. See id.
19. See Sandra L. Murray et al., The Benefits of Positive Illusions: Idealization and the Construction of Satisfaction in Close Relationships, 70 J. PERSONALITY & Soc. PSYCHOL. 79, 92 (1996); Srivastava et al., supra note 10, at 144, 151.
20. Jeffrey Evans Stake, Mandatory Planning for Divorce, 45 VAND. L. REV. 397, 425-29 (1992).
21. Kim, supra note 2, at 465.
22. Id.
23. See id.
24. Many disclosure strategies, and in particular simple warning labels, have been widely criticized in the legal literature as ineffective. See generally Howard Latin, "Good" Warnings, Bad Products, and Cognitive Limitations, 41 UCLA L. REV. 1193, 1195 (1994). However, empirical examinations of even simple, static warning labels have consistently concluded that warnings have useful-albeit modest-effects on behavior. See, e.g., Jennifer J. Argo & Kelley J. Main, Meta-Analyses of the Effectiveness of Warning Labels, 23 J. PUB. POL'Y & MARKETING 193, 205 (2004) (examining forty-eight stuthes and concluding that "[c]onsistent with Cox and colleagues' (1997) meta-analysis, the present research indicates that warnings influence behavior"); Eli P. Cox HI et al., Do Product Warnings Increase Safe Behavior? A Mela-Analysis, 16 J. PUB. POL'Y & MARKETING 195, 198-99 (1997) (finding that warnings increased safe behavior in fifty-three of seventy-nine experimental conditions, and overall warnings increased the number of people engaging in safe behavior by eleven to twenty percent).
25. The best estimate available indicates that approximately fifteen percent of U.S. firms voluntarily offer for-cause protections. J. Hoult Verkerke, An Empirical Perspective on Indefinite Term Employment Contracts: Resolving the Just Cause Debate, 1995 WIS. L. REV. 837, 867. If the demand for such protections grew, it is likely that more firms would offer them, thereby increasing the likelihood that employees could bargain with their feet.
26. Cynthia L. Estlund, How Wrong Are Employees About Their Rights, and Why Does It Matter?, 77 N.Y.U. L. REV. 6, 23-24 (2002); Cass R. Sunstein, Human Behavior and the Law of Work, 87 VA. L. REV. 205, 231-32, 244 (2001) (quoting similar language employed in the anti-discrimination context at 29 U.S.C. § 626(f)(1) (2006)).
27. Estlund, supra note 26, at 23-24; Sunstein, supra note 26, at 244.
28. See Eli P. Cox III & Michael S. Wogalter, Warning Source, in HANDBOOK OF WARNINGS 111, 119 (Michael S. Wogalter ed., 2006).
29. See infra notes 243-53 and accompanying text.
30. Oren Bar-Gill, Seduction by Plastic, 98 Nw. U. L. REV. 1373, 1375-76 (2004).
31. David Dunning et al., Flawed Self-Assessment: Implications for Health, Education, and the Workplace, 5 PSYCHOL. SCI. PUB. INT. 69, 80 (2004) ("One of the strongest moderators of unrealistic optimism is perceived control. The greater a person's perceived control over an event or its outcome, the stronger the person's optimistic bias." (citation omitted)); N.C. Higgins et al., supra note 13, at 319.
32. See Robert E. Hall, The Imparlance of Lifetime Jobs in the U.S. Economy, 72 AM. ECON. REV. 716, 716 (1982) (finding that more than twenty-five percent of workers are in a job that will last twenty or more years).
33. See Angela Littwin, Beyond Usury: A Study of Credit-Card Use and Preference Among Low-Income Consumers, 86 TEX. L. REV. 451, 473-78 (2008) (interviewing low-income women who reported accruing substantial debt when they first obtained a credit card, and who later adopted ways to limit the temptation to borrow).
34. See RONALD J. MANN, CHARGING AHEAD 69 (2006) (reporting aggregate country level data that suggests a link between increases in credit card debt and increases in bankruptcies one to three years later); Robert M. Lawless, The Paradox of Consumer Credit 63 (Univ. of I11. Law & Econ. Working Paper Series, Working Paper No. LE06-015, 2006), available at http://ssrn.com/abstract=906868 (finding that increases in credit card debt increase bankruptcy rates, but only when the debt surpasses a threshold level).
35. Bar-Gill, supra note 30, at 1417-19.
36. Kreuter & Strecher, supra note 15, at 57, 61.
37. For policy suggestions on dealing with the latter goal, see Littwin, supra note 33, at 470, 472 (noting that credit card consumers currendy lack sufficient means of implemendng their desires to limit their access to easy credit as a self-control mechanism).
38. See Weinstein, supra note 1, at 810 tbl.l.
39. John R. Chambers & Paul D. Windschitl, Biases in Social Comparative Judgments: The Role of Nonmotivated Factors in Above-Average and Comparative-Optimism Effects, 130 PSYCHOL. BULL. 813, 813 (2004).
40. See Lauri Larwood & William Whittaker, Managerial Myopia: Self-Serving Biases in Organizational Planning, 62 J. APPLIED PSYCHOL. 194, 196 tbl.l (1977).
41. See David Dunning et al., Ambiguity and Self-Evaluation: The Role of Idiosyncratic Trait Definitions in Self-Serving Assessments of Ability, in HEURISTICS AND BIASES 324, 324 (Thomas Gilovich et al. eds., 2002).
42. See id. (noting that seventy percent of students think that they are above average in leadership ability).
43. See Larwood & Whittaker, supra note 40, at 194 ("[Management students con-sistendy overestimated their abilities; in a marketing exercise, they likewise indicated that a hypothetical firm, of which they were sales managers, would quickly overtake established competition.").
44. See Dunning et al., supra note 31, at 90.
45. See id. at 72 (reporting optimism in flu risk); Weinstein, supra note 1, at 810 tbl.l (examining perceptions of risk for heart attack, lung cancer, cavities, and gum problems).
46. See Dunning et al., supra note 41, at 324 (noting that twenty-five percent of students believe that they are in the top one percent in their ability to get along with others).
47. See Dunning et al., supra note 31, at 72 (reporting that sixty percent of students felt that they were in the top ten percent in terms of interpersonal skills).
48. RAYMOND BAUMHART, AN HONEST PROFIT 20-24 (1968).
49. See Dunning et al., supra note 31, at 72.
50. See id.
51. See K. Patricia Cross, Not Can, But Will College Teaching Improve?, NEW DIRECTIONS FOR HIGHER EDUC., Spring 1977, at 1, 4 (reporting that ninety-four percent of all college professors think that they do above average work).
52. Dunning et al., supra note 31, at 72; Emily Pronin et al., Objectivity in the Eye of the Beholder: Divergent Perceptions of Bias in Self Versus Others, 111 PSYCHOL. REV. 781, 785 (2004).
53. Christine Jolls, Behavioral Economics Analysis of Redistributive Legal Rules, 51 VAND. L. REV. 1653, 1660 (1998); see also Nathan M. Radcliffe & William M.P. Klein, Dispositional, Unrealistic, and Comparative Optimism: Differential Relations with the Knowledge and Processing of Risk Information and Beliefs About Personal Risk, 28 PERSONALITY & Soc PSYCHOL. BULL. 836, 839-40 (2002) (finding above-average effect in adult populations for health risks); Neil D. Weinstein, Unrealistic Optimism About Susceptibility to Health Problems: Conclusions from a Community-Wide Sample, 10 J. BEHAV. MED. 481, 488-89 (1987) (analyzing over-optimism among eighteen to sixty-five year olds and finding age correlated with the degree of a subject's over-optimism for only three out of thirty-two hazards: insomnia, food poisoning, and deafness).
54. Christine Jolls & Cass R. Sunstein, Debiasing Through Law, 35 J. LEGAL STUD. 199, 204 (2006). Because people selectively interpret information, they not only systematically underestimate their relative risk of experiencing a negative event, they also underestimate their absolute level of risk. Id. at 204-05.
55. See Neil D. Weinstein & William M. Klein, Resistance of Personal Risk Perceptions to Debiasing Interventions, 14 HEALTH PSYCHOL. 132, 134 tbl.l (1995).
56. Id. at 134-35.
57. Kreuter & Strecher, supra note 15, at 60.
58. Thomas A. Morton & Julie M. Duck, Communication and Health Beliefs: Mass and Interpersonal Influences on Perceptions of Risk to Self and Others, 28 COMM. RES. 602, 610-11 (2001).
59. See Weinstein & Klein, supra note 55, at 135.
60. See id. at 134.
61. See Baker & Emery, supra note 3, at 444; Weinstein, supra note 1, at 810 tbl.l.
62. See Weinstein, supra note 1, at 810 tbl.l.
63. Jerry M. Burger & Linda Burns, The Illusion of Unique Invulnerability and the Use of Effective Contraception, 14 PERSONALITY & Soc. PSYCHOL. BULL. 264, 264 (1988).
64. See Linda S. Perloff & Barbara K. Fetzer, Self-Other Judgments and Perceived Vulnerability to Victimization, 50 J. PERSONALITY & Soc. PSYCHOL. 502, 504 tbl.l (1986).
65. See Colin Camerer & Dan Lovallo, Overconfidence and Excess Entry: An Experimental Approach, 89 AM. ECON. REV. 306, 308, 311 (1999).
66. Jerry M. Burger & Michele L. Palmer, Changes in and Generalization of Unrealistic Optimism Following Experiences with Stressful Events: Reactions to the 1989 California Earthquake, 18 PERSONALITY & Soc. PSYCHOL. BULL. 39, 41-43 (1992) (finding that students did not exhibit over-optimism about the risks of natural disasters three days after a major earthquake, but over-optimism returned three months after the quake).
67. Chambers & Windschitl, supra note 39, at 816.
68. Dunning et al., supra note 31, at 80 ("One of the strongest moderators of unrealistic optimism is perceived control. The greater a person's perceived control over an event or its outcome, the stronger the person's optimistic bias." (citation omitted)).
69. Id. at 71-72.
70. See Fergus Bolger & Dilek Önkal-Atay, The Effects of Feedback on Judgmental Interval Predictions, 20 INT'L J. FORECASTING 29, 30 (2004) (requesting that subjects create ninety percent confidence intervals by choosing two bounds for a quantitative answer, and finding that these bounds contained the correct answer only thirty-six to fifty-eight percent of the time); Baruch Fischhoff et al., Knowing with Certainty: The Appropriateness of Extreme Confidence, 3 J. EXPERIMENTAL PSYCHOL.: HUM. PERCEPTION & PERFORMANCE 552, 552 (1977) (finding that people who expressed a confidence of ninety percent were right seventy-five percent of the time).
71. Stephen J. Hoch, Counterfactual Reasoning and Accuracy in Predicting Personal Events, 11 J. EXPERIMENTAL PSYCHOL.: LEARNING, MEMORY & COGNITION 719, 722, 724 (1985).
72. Amy H. Mezulis et al., Is There a Universal Positivity Bias in Attributions? A Meta-Analytic Review of Individual, Developmental, and Cultural Differences in the Self-Serving Attributional Bias, 130 PSYCHOL. BULL. 711, 711 (2004) (collecting and analyzing 266 stuthes of the "attributional bias" and concluding that the effect is pervasive despite being more severe in North America as compared with several Asian countries).
73. George Loewenstein & Don Moore, When Ignorance Is Bliss: Information Exchange and Inefficiency in Bargaining, 33 J. LEGAL STUD. 37, 39-42 (2004).
74. See Sandy L. Robinson, Trust and Breach of the Psychological Contract, 41 ADMIN. SCI. Q. 574, 576 (1996) ("A long history of research on cognitive consistency and attitude change has found that people act in ways that preserve their established knowledge structures, perceptions, schemata, and memories.").
75. Babcock & Loewenstein, supra note 14, at 114 (quoting Rasyid Sanitioso et al., Motivated Recruitment of Autobiographical Memories, 59 J. PERSONALITY & Soc. PSYCHOL. 229, 229 (1990)); see also Shelley E. Taylor & Jonathon D. Brown, Illusion and Well-Being: A Social Psychological Perspective on Mental Health, 103 PSYCHOL. BULL. 193, 194 (1988) ("'Instead of a naive scientist entering the environment in search of the truth, we find the rather unflattering picture of a charlatan trying to make the data come out in a manner most advantageous to his or her already-held theories.'" (quoting SUSAN T. FISKE & SHELLEY E. TAYLOR, SOCIAL COGNITION 88 (1984)))
76. Babcock & Loewenstein, supra note 14, at 114-15.
77. Id.
78. Id. at 116-17.
79. Id.
80. Id. at 117.
81. Id. For evidence that professionals are nonetheless less susceptible to biases than other populations, see Russell Korobkin & Chris Guthrie, Psychology, Economics, and Settlement: A New Look at the Role of the Lawyer, 76 TEX. L. REV. 77, 100-21 (1997) (finding that lawyers were less susceptible than undergraduates to a host of biases influencing their choice to settle a hypothetical case).
82. Dunning et al., supra note 41, at 328-29 (finding that as the available criteria to evaluate one's performance increased from two to four to six to infinity, so did above-average effect); Leigh Thompson & George Loewenstein, Egocentric Interpretations of Fairness and Interpersonal Conflict, 51 ORGANIZATIONAL BEHAV. & HUM. DECISION PROCESSES 176, 188-89 (1992) (finding that increasing information provided to unions and workers increases the discrepancy between their assessment of a fair compromise); Nina Mazar et al., The Dishonesty of Honest People: A Theory of Self-Concept Maintenance 36-37 (Apr. 12, 2007) (unpublished manuscript), available at http://ssrn.com/abstract=979648 (finding that increasing the number of plausible interpretations of their actions increases their tendency for deception, and that conversely, forcing them to list their own definition of honesty ex ante decreases dishonesty by decreasing their ability to fit a dishonest act into this definition ex post).
83. Dunning et al., supra note 41, at 325. This has led several scholars to criticize broad discovery rules in civil litigation, which arguably create more ambiguity than clarity about the strength of any particular lawsuit. See, e.g., Loewenstein & Moore, supra note 73, at 50.
84. CALABRESI, supra note 11, at 26.
85. The terms "debiasing strategy" and "insulating strategy" are borrowed from Jolls & Sunstein, supra note 54, at 201, 207.
86. CALABRESI, supra note 11, at 56.
87. See Alexander J. Rothman & Marc T. Kiviniemi, Treating People with Information: An Analysis and Review of Approaches to Communicating Health Risk Information, 25 J. NAT'L CANCER INST. MONOGRAPHS 44, 45 (1999) (citing William M. Klein & Ziva Kunda, Maintaining Self-Serving Social Comparisons: Biased Reconstruction of One's Past Behaviors, 19 PERSONALITY & Soc. PSYCHOL. BULL. 732, 732-39 (1993); Alexander J. Rothman et al., Absolute and Relative Biases in Estimations of Personal Risk, 26 J. APPLIED Soc. PSYCHOL. 1213, 1213-36 (1996)).
88. See Carla C. Chandler et al., It Can't Happen to Me. . . Or Can If? Conditional Base Rates Affect Subjective Probability Judgments, 5 J. EXPERIMENTAL PSYCHOL.: APPLIED 361, 365-67 (1999).
89. See id. at 369.
90. Id.
91. Id. at 363.
92. See id. at 365-67.
93. Kreuter & Strecher, supra note 15, at 57.
94. Id. at 61-62.
95. Meg Gerrard et al., The Effect of Risk Communication on Risk Perceptions: The Significance of Individual Differences, 25 J. NAT'L CANCER INST. MONOGRAPHS 94, 97 (1999).
96. Id.
97. Id.
98. Id.
99. See Nancy E. Avis et al., Accuracy of Perceptions of Heart Attack Risk: What Influences Perceptions and Can They Be Changed?, 79 AM. J. PUB. HEALTH 1608, 1611 (1989) (finding that actuarial risk feedback led many people at high risk of heart attack to improve the accuracy of their perceptions, but cautioning that twelve percent of these high risk subjects developed even greater levels of unrealistic optimism after the feedback).
100. See Babcock & Loewenstein, supra note 14, at 115-16.
101. Id. at 112.
102. Id. at 113.
103. Id. at 115.
104. Id. ("When they learned about the bias, subjects apparently assumed that the other person would succumb to it, but did not think it applied to themselves.").
105. Id.
106. Id.
107. Id. at 115-16.
108. Id. at 116.
109. Id.
110. See, e.g., Edward R. Hirt et al., Activating a Mental Simulation Mind-Set Through Generation of Alternatives: Implications for Debiasing in Related and Unrelated Domains, 40 J. EXPERIMENTAL SOC. PSYCHOL. 374, 377-379 (2004) (finding that basketball enthusiasts who were induced to think that the Portland Trailblazers would win the championship subsequently reduced their estimate of the probability that they would win after considering whether the Lakers would win instead).
111. Jolls & Sunstein, supra note 54, at 210-11; see also Kim Witte & Mike Allen, A Meta-Analysis of Fear Appeals: Implications for Effective Public Health Campaigns, 27 HEALTH EDUC. & BEHAV. 608, 615-16 (2000) (noting the general effectiveness of fear as a tool for behavioral change).
112. Timur Kuran & Cass R. Sunstein, Availability Cascades and Risk Regulation, 51 STAN. L. REV. 683, 685 (1999).
113. See id. (citing Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases, in JUDGMENT UNDER UNCERTAINTY 3, 11 (Daniel Kahneman et al. eds., 1982)).
114. D. Hammond et al., Impact of the Graphic Canadian Warning Labels on Adult Smoking Behaviour, 12 TOBACCO CONTROL 391, 391 (2003).
115. Id. at 391-92.
116. George Loewenstein et al., Statistical, Identifiable, and Iconic Victims, in BEHAVIORAL PUBLIC FINANCE 32, 33 (Edward J. McCaffery &Joel Slemrod eds., 2006) ("Several lines of research have shown that individual cases motivate people more powerfully than statistics, even when the latter are objectively more informative.").
117. Jolls & Sunstein, supra note 54, at 212 (citing Alan Schwartz & Louis L. Wilde, Imperfect Information in Markets for Contract Terms: The Examples of Warranties and Security Interests, 69 VA. L. REV. 1387, 1459-60 (1983)).
118. See id. at 214 (recognizing the potential for consumers to overreact in response to a narrative).
119. Id. at 229.
120. Id. at 229-30.
121. Gregory Mitchell, Why Law and Economics' Perfect Rationality Should Not Be Traded for Behavioral Law and Economics' Equal Incompetence, 91 GEO. L.J. 67, 86 n.46 (2002) ("[B]ecause behavioral decision researchers are interested primarily in finding deviations from norms of procedural rationality by any statistically significant percentage of subjects (that is, they seek to find nonrandom deviations from the neoclassical economic model, and a small percentage who deviate may suffice for purposes of statistical analysis), an experiment often will be portrayed as having found some 'systematic non-rational tendency' even though less than half of the subjects provided the nonra-tional response in the experiment.").
122. See Weinstein, supra note 53, at 489.
123. Robert D. Yonker, Individual Differences and Egocentrism in Negotiations: Who Is Most Likely to Exhibit the Bias? 25-26 (2003) (unpublished Ph.D. dissertation, University of Missouri, St. Louis).
124. See id. at 36 fig.l.
125. See id. at 36.
126. See id. at 55-59.
127. See Jeffrey J. Rachlinski, Cognitive Errors, Individual Differences, and Paternalism, 73 U. CHI. L. REV. 207, 224 (2006) (finding that cognitive ability, education, training, and demographic variables had all failed to produce clear correlations with cognitive biases).
128. See, e.g., supra notes 123-26 and accompanying text.
129. See, e.g., 15 U.S.C. §§ 77e, 77g, 1637 (2006).
130. See Baker & Emery, supra note 3, at 443; Heather Mahar, Why Are There So Few Prenuptial Agreements? 9 (Harvard Law Sch. John M. Olin Ctr. for Law, Econ., and Bus. Discussion Paper Series, Paper No. 436, 2003), available at http://lsr.nelIco.org/ harvard/olin/papers/436.
131. How College Women and Men Feel Today About Sex, Aids, Condoms, Marriage, Kids, GLAMOUR, Aug. 1987, at 261, 263 [hereinafter Women and Men] (finding that only eleven percent of college men and five percent of college women thought that they would ever get a divorce), cited in Elizabeth S. Scott, Rehabilitating Liberalism in Modern Divorce Law, 1994 UTAH L. REV. 687, 700 n.48.
132. Baker & Emery, supra note 3, at 443; Mahar, supra note 130, at 9.
133. See Kim, supra note 2, at 465.
134. See, e.g., Colin Camerer et al., Regulation for Conservatives: Behavioral Economics and the Case for "Asymmetric Paternalism, " 151 U. PA. L. REV. 1211, 1212 (2003).
135. Other scholars have referred to this as "cautious paternalism." See, e.g., Edward J. McCaffery &Joel Slemrod, Toward an Agenda for Behavioral Public Finance, in BEHAVIORAL PUBLIC FINANCE, supra note 116, at 3, 13.
136. See, e.g., Camerer et al., supra note 134, at 1338-39 (discussing the costs of cooling-off periods).
137. See id. at 1251.
138. Id. at 1219.
139. This formula assumes that any legal intervention will have only positive effects for the biased population. This Article does not make this assumption, and instead considers the possibility that an intervention will be a mixed blessing even for the people it is intended to benefit.
140. Camerer et al., supra note 134, at 1219.
141. Id.
142. Baker & Emery, supra note 3, at 443; Mahar, supra note 130, at 9.
143. Baker & Emery, supra note 3, at 443 (finding that more than half of people who had recently applied for a marriage license felt that they would never divorce); Mahar, supra note 130, at 9 (finding that for both law students and the general population, the median person predicted that they had a zero percent chance of divorcing).
144. Mahar, supra note 130, at 15 (finding that law students estimated their risk of divorce at seventeen percent, while the general population estimated their risk at ten percent); Women and Men, supra note 131, at 263 (finding that only eleven percent of college men and five percent of college women thought that they would ever get a divorce).
145. Baker & Emery, supra note 3, at 443. This estimate is over-optimistic. See CARL E. SCHNEIDER & MARGARET F. BRINIG, AN INVITATION TO FAMILY LAW 329 (3d ed. 2006) ("In 1984, 30% of wives were awarded alimony when both parties were represented by counsel, while not one alimony award was made when neither party was represented by counsel.").
146. Baker & Emery, supra note 3, at 443.
147. Id.
148. Id. at 442.
149. Id. at 443.
150. Id.
151. See Ira Mark Ellman & Sharon Lohr, Marriage as Contract, Opportunistic Violence, and Other Bad Arguments for Fault Divorce, 1997 U. ILL. L. REV. 719, 723.
152. See SCHNEIDER & BRINIG, supra note 145, at 329 (noting that, in 1984, thirty percent of wives received alimony payments when both parties were represented by counsel); Kathrine C. Daniels et al., Alternative Formulas for Distributing Parental Incomes at Divorce, 27 J. FAM. & ECON. ISSUES 4, 6 (2006) (collecting stuthes and noting that spousal support is only awarded in ten to Fifteen percent of cases).
153. The conception of autonomy that these states adopt is, of course, debatable. They view autonomy negatively, as freedom from restraint. But autonomy can also be seen positively, as a right to have the means to pursue your goals. Understood in both of these ways, autonomy would require the courts to balance a high wage earner's negative autonomy against a low wage earner's positive autonomy.
154. See Scott, supra note 131, at 704-05.
155. See REGAN, supra note 157, at 141-44.
156. See supra notes 87-99 and accompanying text.
157. See Baker & Emery, supra note 3, at 448.
158. See infra notes 174-75 and accompanying text.
159. See supra note 110 and accompanying text.
160. See Babcock & Loewenstein, supra note 14, at 115-16.
161. See Hirt et al, supra note 110, at 379.
162. See A. Peter McGraw et al., The Affective Costs of Overconfidence, 17 J. BEHAV. DECISION MAKING 281, 288-89 (2004).
163. Ward Farnsworth, The Legal Regulation of Self-Serving Bias, 37 U.C. DAVIS L. REV. 567, 583 (2003) (discussing the self-serving bias in the context of litigants).
164. Louisiana already requires such counseling for couples who choose to enter into a "covenant" marriage. See LA. REV. STAT. ANN. § 9:272 (2006).
165. Jolls, supra note 53, at 1661.
166. See Kimberly K. Assad et al., Optimism: An Enduring Resource for Romantic Relationships, 93 J. PERSONALITY & Soc. PSYCHOL. 285, 292 (2007).
167. Id.
168. See, e.g., Srivastava et al., supra note 10, at 151 (finding, after controlling for initial relationship satisfaction and a host of personality traits, that seventy-five percent of couples with men at or above-median optimism were still together, whereas only fifty-four percent of couples with men at below-median optimism were still together).
169. See Murray et al., supra note 19, at 92 (finding that partners were more satisfied in relationships when they had inaccurate favorable views of their partners' traits); William B. Swann, Jr. & Michael J. Gill, Confidence and Accuracy in Person Perception: Do We Know What We Think We Know About Our Relationship Partners?, 73 J. PERSONALITY & Soc. PSYCHOL. 747, 747 (1997) ("[C]onfidence [about how well you know your partner] may sometimes contribute to relationship quality even when it is unrelated to accuracy.").
170. Assad et al., supra note 170, at 285 (reporting on the effect of dispositional optimism on relationship satisfaction and duration, and finding that it was mitigated by perceptions of support); Srivastava et al., supra note 10, at 143, 147 (same).
171. Srivastava et al., supra note 10, at 143, 147.
172. Michael F. Scheier & Charles S. Carver, Optimism, Coping, and Health: Assessment and Implications of Generalized Outcome Expectancies, 4 HEALTH PSYCHOL. 219, 233-44 (1985).
173. See Michael F. Scheier et al., Dispositional Optimism and Recovery from Coronary Artery Bypass Surgery: The Beneficial Effects on Physical and Psychological Well-Being, 57 J. PERSONALITY SOC. PSYCHOL. 1024, 1029-30 (1989).
174. Shelley E. Taylor et al., Optimism, Coping Psychological Distress, and High-Risk Sexual Behavior Among Men at Risk for Acquired Immunodeficiency Syndrome (AIDS), 63 J. PERSONALITY & Soc. PSYCHOL. 460, 463 (1992).
175. Id. at 470-72.
176. For a review of several of these stuthes, see Michael F. Scheier & Charles S. Carver, Dispositional Optimism and Physical Well-Being: The Influence of Generalized Outcome Expectancies on Health, 55 J. PERSONALITY 169, 173-81 (1987); Shelley E. Taylor & Jonathon D. Brown, Positive Illusions and Well-Being Revisited: Separating Fact From Fiction, 116 PSYCHOL. BULL. 21, 23 (1994) ("[E]xperiments conducted in medical settings clearly demonstrate that people who believe they have control during stressful procedures cope better than those undergoing the same procedures but not exposed to control-enhancing interventions, as indicated by a broad array of physiological, health-related, and affective measures; these effects occur even when that 'control' is largely perceived rather than actual.").
177. See Brian D. Doan & Ross E. Gray, The Heroic Cancer Patient: A Critical Analysis of the Relationship Between Illusion and Mental Health, 24 CAN. J. BEHAV. SCI. 253, 262-63 (1992).
178. See Frode Thuen & Jostein Rise, Psychological Adaptation After Marital Disruption: The Effects of Optimism and Perceived Control, 47 SCANDINAVIAN J. PSYCHOL. 121, 126 (2006) (finding that optimism is strongly correlated with emotional adaptation after a divorce).
179. See, e.g., Milton C. Regan, Jr., Spouses and Strangers: Divorce Obligations and Property Rhetoric, 82 GEO. L.J. 2303, 2389 (1994) ("[S]pouses' lives have been intertwined in ways that the logic of this rhetoric cannot fully capture. The extent of this interdependence is roughly a function of how long individuals are married. As a result, we might require that ex-spouses share the same standard of living for some period of time corresponding to the length of their marriage."); Jana B. Singer, Divorce Reform and Gender Justice, 67 N.C. L. REV. 1103, 1117-18 (1989) (proposing a limited-term alimony that would continue for one year for each two years of marriage); Starnes, supra note 157, at 1551 (urging an analogy of marriage law and the law of business partnerships, and arguing that income sharing should continue until the tasks of the partnership are completed: namely, until the youngest child reaches the age of major-ity);Joan Williams, Is Coverture Dead? Beyond a New Theory of Alimony, 82 GEO. L.J. 2227, 2229, 2258 (1994) (advocating alimony payments until the youngest child leaves the home and an arbitrary number of years has passed).
180. See Antony W. Dnes, The Division of Marital Assets Following Divorce, 25 J.L. & SOC'Y, 336, 339-43 (1998) (discussing incentive effects of various rules of post-divorce property distribution).
181. Baker & Emery, supra note 3, at 443.
182. CHARLES FRIED, CONTRACT AS PROMISE 9-17 (1981).
183. See supra notes 142-50 and accompanying text.
184. See supra notes 156-58 and accompanying text.
185. Stake, supra note 20, at 425-29.
186. See Rebecca Glass, Trading Up: Postnuptial Agreements, Fairness, and a Principled New Suitor for California, 92 CAL. L. REV. 215, 218 (2004) ("Both [prenuptial and postnuptial] agreements are increasingly popular means by which parties allocate assets during marriage and plan for property distribution at the time of death or divorce.").
187. See Mahar, supra note 130, at 16-18.
188. Stake, supra note 20, at 447.
189. See supra notes 169-73 and accompanying text.
190. Montana is the lone exception. See MONT. CODE ANN. §39-2-904 (2007). There is a pending proposal to return to an at-will default rule. H.B. 513, 60th Leg., Res. Sess. (Mont. 2007); David H. Autor et al., The Costs of Wrongful-Discharge Laws 2 n.1 (Nat'l Bureau of Econ. Research, Working Paper No. W9425, 2002), available at http://www.nber.org/papers/W9425.pdf.
191. See Charles J. Muhl, The Employment-at-Will Doctrine: Three Major Exceptions, MONTHLY LAB. REV., Jan. 2001, at 3, 4. Tide VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of "race, color, religion, sex, or national origin." 42 U.S.C. § 2000e-2(a)(l) (2000).
192. Kim, supra note 2, at 449. 19V Id. at 459.
193. See id. at 471. In one case, the court even held that an express for-cause clause in a contract did not overcome Missouri's strong presumption in favor of at-will employment. See Main v. Skaggs Cmty. Hosp., 812 S.W.2d 185, 189 (Mo. Ct. App. 1991).
194. Even Montana's broad for-cause protections would not apply to the situation in Kim's study. In Montana, a termination is legal if it is based on "a reason that is neither false, whimsical, arbitrary or capricious, and it must have some logical relationship to the needs of the business." Buck v.
195. Kim, supra note 2, at 463 n.55. Similar results were reported by Richard Freeman and Joel Rogers, who found that workers erroneously believe that employers cannot hire strike breakers, cannot force workers to perform dangerous jobs, and cannot fire workers arbitrarily. RICHARD B. FREEMAN & JOEL ROGERS, WHAT WORKERS WANT 118-22 (1999).
196. Kim, supra note 2, at 465.
197. See Robert F. Wayland et al., Employment-at-Will Statements: Perceptions of Job Applicants, 14 INT'L J. MANPOWER 22, 28 (1993) (finding that fifty-eight percent of students entering the work force thought that an explicit at-will waiver would not be enforceable even if signed by the employee).
198. For other potential contributing factors, see Estlund, supra note 26, at 14-15 (arguing that when employers adopt internal dispute resolution procedures, employees sensibly infer that their employer needs to have some defensible reason to terminate employees).
199. See Kim, supra note 2, at 482.
200. A long line of psychological research has confirmed this pattern, which is sometimes discussed under the label cognitive dissonance and sometimes discussed as a tendency to confirm one's prior schemas. See, e.g., Wayne Eastman, Overestimating Oneself and Overlooking the Law: Psychological Supports for Employment at Will, 10 EMP. RESP. & RTS. J. 21, 30 (1997) (finding that MBA students who thought at-will employment was a bad policy were less likely to believe that it was the current default rule); Robinson, supra note 74, at 576 ("A long history of research on cognitive consistency and attitude change has found that people act in ways that preserve their established knowledge structures, perceptions, schemata, and memories."); Mark V. Roehling & Wendy R. Boswell, "Good Cause Beliefs" in an "At-Will World"? A Focused Investigation of Psychological Versus Legal Contracts, 16 EMP. RESP. & RTS. J. 211, 215 (2004) ("[T]he good cause norm contributes to a widely shared preemployment schema . . . that filters employer policies and shapes the employment experience to create a belief that employers are obligated to have a good reason to discharge an employee-formal policies not withstanding." (citation omitted)). Kim has also noted this psychological pattern and its potential effects on employee learning. Kim supra note 2, at 496 ("[0]nce formed, beliefs are likely to persist because individuals tend to notice evidence that confirms their beliefs, while overlooking contradictory information.").
201. See Kim, supra note 2, at 452.
202. The venerable General Social Survey asked several nationally representative samples of workers whether they were "very likely," "fairly likely," "not too likely," or "not likely at all" to be fired or laid off in the next twelve months. See Stefanie R. Schmidt, Long-Run Trends in Workers' Beliefs About Their Own Job Security: Evidence from the General Social Survey, 17 J. LAB. ECON. S127, S128-29 (1999). The Health and Retirement study uses similar probability terms. See, e.g., INST. FOR SOC. RES., UNIV. OF MICHIGAN, 2000 HEALTH AND RETIREMENT STUDY § H, at 539, 543 (2002), available at http://hrsonline.isr.umich.edu/meta/2000/ core/qnaire/online/15hr00h.pdf.
203. See Thomas S. Wallsten et al., Measuring the Vague Meanings of Probability Terms, 115 J. EXPERIMENTAL PSYCHOL.: GEN. 348, 360, 363 (1986) (finding that individuals vary widely in their interpretation of words that describe frequencies, and noting that the same words are interpreted differently in different contexts).
204. Charles F. Manski & John D. Straub, Worker Perceptions of Job Insecurity in the Mid-1990s: Evidence from the Survey of Economic Expectations, 35 J. HUM. RESOURCES 447, 449-50 (2000).
205. See Jeff Dominitz & Charles F. Manski, Perceptions of Economic Insecurity: Evidence from the Survey of Economic Expectations, 61 PUB. OPINION Q. 261, 281 (1997).
206. Id.
207. See id. at 281-82.
208. Id. at 282.
209. Id.
210. Schmidt, supra note 207, at S130-31.
211. See id. at S136-39.
212. See supra Part II.A.1.
213. Even if many or most workers underestimated their probability of being fired, it is unclear whether any disclosure strategy could debias these beliefs. The probability of being fired, like the probability of getting a divorce, is likely to be subject to a strong above-average effect. In one pertinent study, eighty-eight percent of students exhibited some above-average effect when predicting whether they would ever be fired from a job. See Weinstein, supra note 1, at 810 tbl.l (reporting that optimistic responses outnumbered pessimistic reponses 7.56 to 1). On average, students felt that they were thirty percent less likely to be fired than their peers. See id. In a study of two engineering firms, approximately forty percent of engineers believed that they were in the top five percent of their respective companies. Todd R. Zenger, Why Do Employers Only Reward Extreme Performance? Examining the Relationships Among Performance, Pay, and Turnover, 37 ADMIN. SCI. Q. 198, 202 (1992). If these engineers believed that their likelihood of being fired was correlated with their performance, then they probably believed that they were significantly less likely than their co-workers to be fired. Workers who believe that they are less likely to be fired than their peers are less likely to respond to disclosures about their technical lack of job security. In short, correcting beliefs of at-will employees in this context would simply bring another bias to the forefront; one that is much less susceptible to debiasing efforts. 219 Of course, if workers do not believe that they have the right to a remedy for being terminated arbitrarily, or if they believe that they cannot obtain a remedy for some practical reason, then they would not believe that the law provides them with any form of safety net. These workers will not be lead to underinsure based on their beliefs about at-will employment, and therefore even if these beliefs are factually incorrect, they would not create costs. Debiasing would therefore be unnecessary.
214. Michael S. Wogalter et al., On the Adequacy of Legal Documents: Factors That Influence Informed Consent, 42 ERGONOMICS 593, 595, 604 (1999) (discussing existing stuthes and conducting research showing that short and simple consent forms communicate more information than longer, more detailed forms).
215. Kim, supra note 2, at 465.
216. See id. (reporting that three-quarters of respondents who believed the law forbade cost-saving discharges continued this belief despite the explicit disclosure).
217. Elizabeth J. Wilson & Daniel L. Sherrell, Source Effects in Communication and Persuasion Research: A Meta-Analysis of Effect Size, 21 J. ACAD. MARKETING SCI. 101 (1993) (finding source effects in meta-analysis of 114 stuthes).
218. Cox & Wogalter, supra note 28, at 119 (finding that people make common-sense credibility judgments when assessing sources such as the American Medical Association, the U.S. Surgeon General, and unlabeled warnings).
219. C. Samuel Craig & John M. McCann, Assessing Communication Effects on Energy Conservation, 5 J. CONSUMER RES. 82, 86 (1978) (finding that consumers reduced energy more when the request was attributed to a government agent rather than the electric company); Michael S. Wogalter et al., Effect of Signal Word and Source Attribution on Judgments of Warning Credibility and Compliance Likelihood, 24 INT'L J. INDUS. ERGONOMICS 185, 190-92 (1999) (finding that the mere addition of the words "Government Warning" increases the perceived credibility of nutrition and health labels).
220. See generally Latin, supra note 24, at 1206-55 (discussing the various reasons for the ineffectiveness of warning labels).
221. See Cox et al., supra note 24, at 199.
222. Id. at 197 tbl.l.
223. See Dunning et al., supra note 31, at 80.
224. See Jack Stieber, Recent Developments in Employment-at-Will, 36 LAB. L.J. 557, 558 (1985) (estimating that there are sixty million at-will employees in the United States); see also Richard J. Pratt, Comment, Unilateral Modification of Employment Handbooks: Further Encroachments on the Employment-at-Will Doctrine, 139 U. PA. L. REV. 197, 197 (1990) ("[E]ighty-five percent of the present American work force-approximately eighty-three million people-are employed under the at-will doctrine.").
225. See supra notes 203-06 and accompanying text.
226. Employers may also have an incentive to make false promises of job security. The disclosure strategy advocated here would not, therefore, cut against courts getting involved in enforcing oral promises.
227. See supra Part III.A.3.
228. See, e.g., Thomas M. Begley et al., The Relationships of Type A Behavior and Optimism with Job Performance and Blood Pressure, 15 J. Bus. & PSYCHOL. 215, 223-25 (2000).
229. See Richard G. Best et al., Core Self-Evaluations and Job Burnout: The Test of Alternative Models, 10 J. OCCUPATIONAL HEALTH PSYCHOL. 441, 450-51 (2005) (finding a correlation between self-esteem, self-efficacy, and perceived employer support among health care workers).
230. See Kim, supra note 2, at 482.
231. See supra notes 232-36 and accompanying text.
232. J. Hoult Verkerke, An Empirical Perspective on Indefinite Term Employment Contracts: Resolving the Just Cause Debate, 1995 WIS. L. REV. 837, 867.
233. See, e.g., Diosdado v. Diosdado, 118 Cal. Rptr. 2d 494, 496-97 (Cal. Ct. App. 2002) (refusing to enforce a prenuptial agreement providing for a $50,000 adultery penalty because "the agreement attempts to impose a penalty on one of the parties as a result of that party's 'fault' during the marriage, [and therefore] it is contrary to the public policy underlying the no-fault provisions for dissolution of marriage").
234. Cf. Alan Schwartz & Louis L. Wilde, Imperfect Information in Markets for Contract Terms: The Examples of Warranties and Security Interests, 69 VA. L. REV. 1387, 1427-30 (1983) (analyzing the effects of optimism and pessimism on consumer demands for product warranties and concluding that markets are well suited to correct for pessimism but cannot adequately address optimism).
235. Cf. Jules Coleman, The Costs of The Costs of Accidents, 64 MD. L. REV. 337, 346, 352 (2005) (arguing that, at a minimum, the questions of reducing costs and distributing costs are separate, and ultimately concluding that the goal of reducing aggregate cost is secondary to issues of justice and distribution).
236. Schwartz & Wilde, supra note 240, at 1427-28.
237. Estlund, supra note 26, at 23-24; Sunstein, supra note 26, at 244-45.
238. Esdund, supra note 26, at 23-24; Sunstein, supra note 26, at 244.
239. Pub. L. No. 90-202, 81 Stat. 602 (codified as amended at 29 U.S.C.A. §§ 621-634 (West 1999 & Supp. 2008)).
240. Esdund, supra note 26, at 24; Sunstein, supra note 26, at 244.
241. U.S.C. § 626(f)(1) (2006).
242. Id.
243. Kim, supra note 2, at 465.
244. Cf. John C. Coffee, Jr., The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role, 89 COLUM. L. REV. 1618, 1623 (1989) ("The rationale for ... a 'coercive' default rule is that it forces those possessing private information to disclose it to the market....").
245. See Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 YALE L.J. 87, 95-100 (1989) (evaluating penalty default rules as "a way to encourage the production of information").
246. For an example of how unpredictable ex post enforcement waivers can be, see McDonald v. Mobil Coal Producing, Inc., 820 P.2d 986, 990-91 (Wyo. 1991) (holding that an express at-will disclaimer that followed the words "READ CAREFULLY BEFORE SIGNING" was not sufficiendy clear because it was not set off by a border, in large print, or in the beginning of the handbook).
247. See Thomas W. Merrill, Capture Theory and the Courts: 1967-1983, 72 CHI.-KENT L. REV. 1039, 1050 (1997) (defining agency capture as the phenomenon where agencies "become 'captured' by the business organizations that they are charged with regulating").
248. Federal Reserve Statistical Release: Consumer Credit (July 8, 2008), http:// www.federalreserve.gov/RELEASES/g19/20080708 (revolving credit, non-seasonally adjusted).
249. Littwin, supra note 33, at 459.
250. MANN, supra note 34, at 41.
251. See id. 45-56; Richard A. Feinberg, Credit Cards as Spending Facilitating Stimuli: A Conditioning Interpretation, 13 J. CONSUMER RES. 348, 355 (1986) (reviewing nearly a dozen stuthes showing a correlation between using credit cards and spending more); Littwin, supra note 33, at 467 (conducting interviews with low-income women and Finding that two-thirds of them reported that credit cards created temptation to spend more than they should).
252. See Feinberg, supra note 257, at 350, 352-54.
253. See George Loewenstein & Ted O'Donoghue, "We Can Do This the Easy Way or the Hard Way": Negative Emotions, Self-Regulation, and the Law, 73 U. CHI L. REV. 183, 197 (2005) (noting that people think that paying credit card debt is less pleasant than paying a parking ticket).
254. The women in Angela Littwin's study said it well: one woman said, "I charge, and I charged because I needed-you know, you go, 'Oh, I need clothing. Oh, I need a birthday present.' And I've been 'needing.' As you can see, I 'needed' too much." Littwin, supra note 33, at 469. Another explained, "When I originally took out that card, I didn't know how quickly the amount could skyrocket, till you owe them an arm and a leg." Id. at 480.
255. Pub. L. No. 109-8, 119 Stat. 23 (codified as amended in scattered sections of 11, 12, 18, 28 U.S.C.).
256. Pub. L. No. 90-321, 82 Stat. 146 (1968) (codified as amended at 15 U.S.C. §§ 1601-1677 (2006)).
257. U.S.C. § 1637(b) (2006).
258. Id. This warning is quite similar to one that California attempted to require in 2002. See CAL. CIV. CODE § 1748.13 (West Supp. 2008), invalidated by Am. Bankers Ass'n v. Lockyer, 239 F. Supp. 2d 1000 (E.D. Cal. 2002) (holding that the state statute unconstitutionally interfered with multiple federal laws).
259. U.S.C. § 1637(b)(11)(A) (2006).
260. See Richard Wiener et al., Consumer Credit Card Use: The Roles of Creditor Disclosure and Anticipated Emotion, 13 J. EXPERIMENTAL PSYCHOL.: APPLIED 32, 44 (2007).
261. Id.
262. Id. at 38.
263. Id.
264. Id.
265. Id. at 38-39.
266. For additional costs of over-optimism in this context, see Sha Yang et al., Unrealistic Optimism in Consumer Credit Card Adoption, 28 J. ECON. PSYCHOL. 170, 178-79 (2007) (analyzing two measures of optimism and finding that, under each measure, overly optimistic people are less likely to consider interest rates when they obtain a credit card).
267. See supra notes 30-31 and accompanying text.
268. For further comments about the dangers of assuming static models of human behavior that do not account for the possibility of learning, see Mitchell, supra note 121, at 165.
269. See Littwin, supra note 33, at 469-70.
270. See id.
271. Jonathan Klick and Gregory Mitchell have recently argued that any government intervention that reduces the cost of an error will also substantially reduce individual incentives to learn. Jonathan Klick & Gregory Mitchell, Government Regulation of Irrationality: Moral and Cognitive Hazards, 90 MINN. L. REV. 1620, 1633 (2006). This assumes a linear or near-linear relationship between incentives and motivation: the greater the incentive, the more motivated an individual will be to make the proper choice. Experimental economics has shown, however, that there is not a linear relationship between potential losses and cognitive effort; small incentives and large incentives often produce similar results. See Mitchell, supra note 121, at 114-16. There are also intuitive reasons to believe that one's cognitive efforts may max out at some point, making further increases in the costs of an error irrelevant to cognitive effort. This intuition is borne out in the field. Insurance companies create incentives for drivers to be careful by charging a deductible, even though this deductible can be quite small compared to the cost of an accident. Similarly, our entire educational system is built on the assumption that small incentives (grades) can be sufficiently motivating. This suggests that the government could substantially reduce the costs of error without appreciably affecting the likelihood that individuals will learn from their mistakes.
272. See Littwin, supra note 33, at 478.
273. Angela Littwin has recently proposed a series of "self- directed" credit card reforms aimed at allowing people to pre-commit to spending limits, opt-out of credit card solicitations, and design cards that reduce their tendency to overborrow. See id. at 478-96. These reforms are aimed at a group of consumers that Littwin deems "sophisticated" because they are aware that they may borrow more than they intend. Id. at 467. This Article focuses on the second major group of consumers that Littwin identifies-"naive" consumers who do not think that they will overborrow and later regret their initial choices-and explores how policymakers might help naive consumers become more sophisticated.
274. See, e.g., TERESA A. SULLIVAN ET AL., THE FRAGILE MIDDLE CLASS 72 (2000); Susan Block-Lieb & Edward J. Janger, The Myth of the Rational Borrower: Rationality, Behavioralism, and the Misguided "Reform" of Bankruptcy Law, 84 TEX. L. REV. 1481, 1521-24 (2006); Todd J. Zywicki, An Economic Analysis of the Consumer Bankruptcy Crisis, 99 Nw. U. L. REV. 1463, 1496 (2005); Ronald J. Mann, Credit Cards, Consumer Credit & Bankruptcy 30 (Univ. of Texas Sch. of Law Working Paper Series, Working Paper No. 44, 2006), available at http://ssrn.com/abstract=690701.
275. See Mann, supra note 280, at 27 tbl.9 (repeating an analysis done in MANN, supra note 34, at 71, to account for and correct a weakness in his statistical methodology, and largely finding that his original results remained unchanged).
276. Id. at 30.
277. Wiener et al., supra note 266, at 33.
278. Littwin, supra note 33, at 58 (quoting low-income women who did not know that their interest rates could go up because of universal default rules); Ronald J. Mann, "Contracting" for Credit, 104 MICH. L. REV. 899, 923 (2006) (describing "universal default provisions" under which credit card companies can raise interest rates on existing debt in response to late payments on other credit cards).
279. For a discussion of why credit card debt causes bankruptcies, as opposed to the opposite causal direction-the availability of a future bankruptcy discharge causing increased credit card spending-see Mann, supra note 280, at 31-32 (confronting several arguments by Todd Zywicki and arguing that it is doubtful that debtors can predict bankruptcy three years in advance in order to start borrowing strategically); see also TERESA SULLIVAN ET AL., AS WE FORGIVE OUR DEBTORS 240-42 (2d ed. 1999) (reporting that the variation in filing rates within states is greater than the variation between states even though some states provide much higher incentives to opportunistically borrow and then file for bankruptcy by protecting substantially more property from creditors); Block-Leib & Janger, supra note 280, at 1525 (arguing that opportunistic borrowers would be very costly to credit card companies, and yet there is little evidence that the increase in bankruptcies has had much effect on the cost to credit card companies of extending credit); Joshua D. Wright, Behavioral Law and Economics, Paternalism, and Consumer Contracts: An Empirical Perspective, 2 N.Y.U. J.L. & LIBERTY 470, 492 (2007) ("The results also pose a challenge to the hypothesis that [consumers] ramp up borrowing in anticipation of filing because the surge in bankruptcies comes a year after aggregate credit card debt increases.").
280. Wiener et al., supra note 266, at 32.
281. DAVID S. EVANS & RICHARD SCHMALENSEE, PAYING WITH PLASTIC 103 (2d ed. 2005).
282. Id.
283. Mann, supra note 284, at 922-23.
284. Loewenstein & O'Donoghue, supra note 259, at 197-98.
285. See Bar-Gill, supra note 30, at 1418-20. This is similar to a suggestion by Alan Schwartz and Larry Wilde that consumers should receive information about how many consumers end up defaulting on their credit card debt, along with an admonition that consumers should not think that they will be better than average at avoiding default. Schwartz & Wilde, supra note 240, at 1436.
286. See, e.g., Timothy C. Lambert, Fair Marketing: Challenging Pre-Application Lending Practices, 87 GEO. L.J. 2181, 2189-93 (1999).
287. See supra notes 93-99 and accompanying text.
288. See supra note 291 and accompanying text.
289. For example, with an annual percentage rate (APR) of eighteen percent, and a minimum payment of $20, a consumer would pay off a $500 debt in fifty-nine months, and pay a total of $215.68 in interest.
290. See Loewenstein & O'Donoghue, supra note 259, at 197.
291. See Littwin, supra note 33, at 459.
292. See id. at 490 (reporting that low-income women rated pawn shops and financed purchasing plans as better sources of borrowing than credit cards because with credit cards it was too easy to accrue unmanageable debt).
293. Tom Brown & Lacey Plache, Paying with Plastic, Maybe Not So Crazy, 73 U. CHI. L. REV. 63, 80 (2006) ("[R]evolvers [consumers who do not pay their credit card balance in full each month] were younger and had lower income, less education, and larger households than nonrevolvers. Revolvers more frequendy did not own their homes and were not married compared to nonrevolvers.").
294. F. H. Buckley & Margaret F. Brinig, The Bankruptcy Puzzle, 27 J. LEGAL STUD. 187, 196, 206 (1998) (creating a model to predict bankruptcies and ultimately concluding that bankruptcy rates are most affected by local social norms). Of course, the proprietary algorimms of credit card companies may be more successful in predicting bankruptcies, but academics and government regulators do not have access to these data.
295. Loewenstein & O'Donoghue, supra note 259, at 200.
296. For example, Bar-Gill proposes a ban on unsolicited offers that contain low introductory rates or other forms of dual pricing. Bar-Gill, supra note 30, at 1421. This would be an example of asymmetric paternalism because consumers who need short-term low rates, and are willing to pay for them with higher future rates, could solicit such offers from the credit card companies. People who underestimate the importance of long-term rates will be insulated from the effects of the misjudgments.
297. See Mann, supra note 284, at 899 (advocating banning retroactive price adjustments because such terms are "unpriceable" by the consumer at the time she enters the credit card contract); Schwartz & Wilde, supra note 240, at 1460 (advocating standardized terms to help facilitate comparison shopping).
298. Mann, supra note 284, at 927-28.
299. See supra notes 85-86 and accompanying text.
300. For example, even equity partners in law firms have sticky expectations about their partnership rights, which may alter the way that courts should interpret them. See David B. Wilkins, Partner Shmartner! EEOC v. Sidley Austin Brown & Wood, 120 HARV. L. REV. 1264, 1264-66, 1268 (2007).