What comes after victory for behavioral law and economics?

University of Illinois Law Review

Volumn 2011, Issue 5, 2011, Pages 1653-1674

  Korobkin, Russell ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 83155193375     PISSN: 02769948     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (75)

1. Christine Jolls, Cass R. Sunstein & Richard Thaler, A Behavioral Approach to Law and Economics, 50 STAN. L. REV. 1471 (1998). (Pubitemid 128421723)
2. Russell B. Korobkin & Thomas S. Ulen, Law and Behavioral Science: Removing the Rationality Assumption from Law and Economics, 88 CALIF. L. REV. 1051 (2000).
3. For a thorough discussion regarding factors that contribute to citation frequency including journal placement, time of release, article topic, and article quality, see William M. Landes & Richard A. Posner, Heavily Cited Articles in Law, 71 CHI.-KENT L. REV. 825 (1996).
4. A Behavioral Approach to Law and Economics has been cited in 808 articles according to Westlaw; 676 according to HeinOnline. David R. Johnson & David Post, Law and Borders-The Rise of Law in Cyberspace, 48 STAN. L. REV. 1367 (1996) came in second in the Westlaw search with 625 citing articles (521 in HeinOnline). (Pubitemid 126406382)
5. Linda Hamilton Krieger, The Content of Our Categories: A Cognitive Bias Approach to Discrimination and Equal Employment Opportunity, 47 STAN. L. REV. 1161 (1995), finished second in the HeinOnline search with 533 citing articles (610 in Westlaw).
6. E.g., William J. Stuntz, The Pathological Politics of Criminal Law, 100 MICH. L. REV. 505 (2001), registering 385 citations in the Westlaw database and 322 in HeinOnline, is the second mostcited article published since the year 2000.
7. Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 VA. L. REV. 247 (1999) (registering 411 citations in Westlaw and 358 citations in HeinOnline) comes in second to Law and Behavioral Science in the ranking of all articles published after A Behavioral Approach to Law and Economics in May 1998.
8. In addition to A Behavioral Approach to Law and Economics and Law and Behavioral Science, see Krieger, supra note 6 (registering 610 citations in Westlaw and 533 citations in HeinOnline);
9. Richard H. McAdams, The Origin, Development, and Regulation of Norms, 96 MICH. L. REV. 338 (1997) (registering 473 citations in Westlaw and 431 citations in HeinOnline);
10. and Cass R. Sunstein, Sociol Norms and Social Roles, 96 COLUM. L. REV. 903 (1996) (registering 486 citations in Westlaw and 440 citations in HeinOnline).
11. See, e.g., Faruk Gul & Wolfgang Pesendorfer, The Case for Mindless Economics, in THE FOUNDATIONS OF POSITIVE AND NORMATIVE ECONOMICS 3, 8 (Andrew Caplin & Andrew Schotter eds., 2008) ("As its welfare criterion, standard economics uses the individual's choice behavior, that is, revealed preferences..... Hence, welfare is defined to be synonymous with choice behavior.").
12. This well-worn fable is commonly referred to as "the Drunkard's Search." See, e.g., Robert Jervis, The Drunkard's Search, in EXPLORATIONS IN POLITICAL PSYCHOLOGY 338 (Shanto Iyengar & William J. McGuire eds., 1993).
13. See, e.g., Yulie Foka-Kavalieraki & Aristides N. Hatzis, Rational After All: Toward an Improved Model of Rationality in Economics 18-20 (Oct. 19, 2010) (unpublished manuscript), available at http://papers.ssrn.com/sol3/papers. cfm?abstract-id=1692441 (claiming to defend "rational choice theory" while arguing that "the concept of rationality should be appropriately extended so as to include and explain the presence of some seemingly cognitive quirks or 'irrationalities'").
14. Richard A. Posner, Behavioral Law and Economics: A Critique, ECON. EDUC. BULL., Aug. 2002, at 1, 2.
15. See, e.g., Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113 YALE L. J. 541, 544 (2003) (limiting their rational choice analysis of contract law to business-tobusiness transactions).
16. The Vermont senator famously advised that "[t]he United States could well declare unilaterally... that this stage of the Vietnam War is over-that we have 'won' in the sense that our armed forces are in control of most of the field and no potential enemy is in a position to establish its authority over South Vietnam." Richard Eder, Aiken Suggests U. S. Say It Has Won War, N. Y. TIMES, Oct. 20, 1966, at 1. Today, a reference to Aiken's suggestion is sometimes understood as a call for abandoning a failed policy without admitting defeat.
17. See, e.g., Richard Gwyn, Victory in Afghanistan Just Means Avoiding Defeat, TORONTO STAR, July 23, 2010, at A19. But this was not Aiken's message. Rather, his point was that when an objective has been achieved, sometimes nothing is left to fight for, or at least not enough to justify the costs.
18. See Mark A. Stoler, What Did He Really Say? The "Aiken Formula" for Vietnam Revisited, 46 VT. HIST. 100, 100-08 (1978) (stating that Aiken was merely suggesting a way to de-escalate the goals of U. S. policy in Vietnam back to what he felt were the original goals upon first entering into the country).
19. As an example, in a blog post responding to an earlier draft of this article, George Mason Law Professor Josh Wright defends traditional, rational choice law and economics against the behavioral approach by alleging the greater usefulness of the former in the realm of prediction. See Josh Wright, Declaring Victory or Premature Celebration?, TRUTH ON MKT. (Apr. 15, 2011, 10:34 AM), http://tmhonthemarket.com/2011/04/15/declarmg-victory-or-premature-celebration/.
20. JOHN MAYNARD KEYNES, A TRACT ON MONETARY REFORM 80 (1923) ("[The] long run is a misleading guide to current affairs. In the long run we are all dead.").
21. On the last of these points, see Eric A. Posner, Economic Analysis of Contract Law After Three Decades: Success or Failure?, 112 YALE L. J. 829, 865-67 (2003).
22. See, e.g., DANIEL H. COLE & PETER Z. GROSSMAN, PRINCIPLES OF LAW AND ECONOMICS 19 (2005).
23. See, e.g., Michael W. McConnell, The Counter-Revolution in Legal Thought: Four Conservative Ideas Are Setting the Terms of Debate, 41 POL'Y REV., Summer 1987, at 18, 23-24 ([W]hile law and economics "has no overt ideological element...[.] law and economics scholars will-with only rare exceptions-take positions comparable with libertarian conservatives.").
24. As Mark Kelman appropriately generalizes from the literature, behavioral law and economics scholarship (what Kelman calls "Heuristics and Biases Scholarship") "has tended, to some extent, to favor, or at least be more tolerant of, expert displacement of both market choices and democratic preference expression. " MARK KELMAN, THE HEURISTICS DEBATE 67 (2011).
25. See, e.g., Russell Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability, 70 U. CHI. L. REV. 1203, 1293 (2003).
26. See generally Russell Korobkin, Empirical Scholarship in Contract Law: Possibilities and Pitfalls, 2002 U. ILL. L. REV. 1033, 1050-61 (describing the reasons that empirical data often does not resolve disputes over legal rules using examples from contract law scholarship).
27. The Retirement Income Deficit, RETIREMENT USA, www.retirement-usa.org/ retirement-income-deficit-0 (last visited July 31, 2011).
28. On the role of information salience, see RICHARD NISBETT & LEE ROSS, HUMAN INFERENCE: STRATEGIES AND SHORTCOMINGS OF SOCIAL JUDGMENT 8 (1980).
29. See generally Norbert Schwarz & Leigh Ann Vaughn, The Availability Heuristic Revisited: Ease of Recall and Content of Recall As Distinct Sources of Information, in HEURISTICS AND BIASES: THE PSYCHOLOGY OF INTUITIVE JUDGMENT 103 (Thomas Gilovich et al. eds., 2002).
30. On hyperbolic discounting, see generally Shane Frederick et al., Time Discounting and Time Preference: A Critical Review, 40 J. ECON. LITERATURE, June 2002, at 351, 351.
31. On the optimism bias, see generally David A. Armor & Shelley E. Taylor, When Predictions Fail: The Dilemma of Unrealistic Optimism, in HEURISTICS and BIASES: THE PSYCHOLOGY OF INTUITIVE JUDGMENT, supra note 28, at 334.
32. RICHARD H. THALER & CASS R. SUNSTEIN, NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS 4-6 (2008).
33. Russell Korobkin, Libertarian Welfarism, 97 CALIF. L. REV. 1651, 1677-80 (2009) (advocating "'policy-forcing' default rules").
34. See, e.g., BARRY SCHWARTZ, THE PARADOX OF CHOICE: WHY MORE IS LESS (2004).
35. Patrick Henry, Remarks at the Virginia Convention: Give Me Liberty or Give Me Death (Mar. 23, 1775).
36. See, e.g., President George W. Bush, U. S. President, Address Before a Joint Session of the Congress on the State of the Union 1 Pub. Papers 113 (Feb. 2, 2005) (advocating privatization with restrictions on available types of investments and on withdrawal options).
37. See, e.g., KARL J. BORDEN, CATO INST., CATO INSTITUTE SOCIAL SECURITY CHOICE PAPER No. 1: DISMANTLING THE PYRAMID: THE HOW & WHY OF PRIVTTIZING SOCIAL SECURITY (1995), http://www.cato.org/pubs/ssps/sspl.pdf.;
38. Louis D. Enoff & Robert E. Moffit, Social Security Privatization in Britain: Key Lessons for America's Reformers, BACKGROUNDER, Aug. 6, 1997, at 1-2, 29.
39. In the 2010 Congressional elections, much was made of the fact that Nevada's Republican senatorial candidate Sharron Angle had favored the abolition of the Social Security system, a position considered out of the mainstream, even for a conservative. See Michael R. Blood, Tea Party Candidate Is Nevada Hopeful on the Rise, TAHOE DAILY TRIB. (June 1, 2010), http://www. tahoedailytribune.com/article/20100601/NEWS/100609992;
40. During the Primary, Angle Said Social Security "Can't Be Fixed," ST. PETERSBURG TIMES POLITIFACT. COM (June 24, 2010), http://www.politifact.corri/truth-o-meter/statements/2010/jun/24/ harry-reicVduring-primary-angle-said-social-security-cant-be-/. Notwithstanding the antigovernment sentiment that swept the unknown Angle to the Republican senatorial nomination, during the general election campaign she changed her position, supporting only privatization rather than abolition of Social Security.
41. See Mark Murray, Angle's 180-degree Turn on Social Security, FIRST READ FROM NBC NEWS (Aug. 12, 2010, 3:30 PM), http//firstread.msnbc.msn.com/-news/ 2010/08/12/4875847-angles-180-degree-turn-on-social-security (quoting Angle as advocating "sav[ing] Social Security by locking the lock box").
42. See Michael Sivak & Michael J. Flannagan, Flying and Driving After the September 11 Attacks, AM. SCI., Jan.-Feb. 2003, at 6, 6-8 (stating that flying the distance of a typical nonstop flight is sixty-five times less risky than driving that distance).
43. See Sarah Lichtenstein & Paul Slovic, The Construction of Preference: An Overview, in THE CONSTRUCTION OF PREFERENCE 1 (Sarah Lichtenstein & Paul Slovic eds., 2006);
44. John W. Payne et al., Measuring Constructed Preferences: Towards a Building Code, 19 J. RISK & UNCERTAINTY 243, 245 (1999).
45. See, e.g., Foka-Kavalieraki & Hatzis, supra note 13, at 7; Matthew Rabin, Psychology and Economics, 36 J. ECON. LITERATURE, Mar. 1998, at 11, 13-16 (1998).
46. Amos Tversky & Daniel Kahneman, Loss Aversion in Riskless Choice: A Reference-Dependent Model, 106 Q. J. ECON. 1039, 1039-40 (1991).
47. See generally Daniel Kahneman & Amos Tversky, Prospect Theory: An Analysis of Decision Under Risk, 47 ECONOMETRICA 263 (1979).
48. William Samuelson & Richard Zeckhauser, Status Quo Bias in Decision Making, 1 J. RISK & UNCERTAINTY 7, 7-8 (1988).
49. See Richard Thaler, Toward a Positive Theory of Consumer Choice, 1 J. ECON. BEHAV. & ORG. 39, 44 (1980).
50. For an attempt to describe the circumstances in which the endowment effect is and is not likely to exist, see Russell Korobkin, The Endowment Effect and Legal Analysis, 97 NW. U. L. REV. 1227, 1235-42 (2003).
51. Russell Korobkin & Chris Guthrie, Psychology, Economics, and Settlement: A New Look at the Role of the Lawyer, 76 TEX. L. REV. 77, 133-34 (1997);
52. Russell Korobkin, The Status Quo Bias and Contract Default Rules, 83 CORNELL L. REV. 608, 667 (1998) ("[P]arties that choose to indulge their preference for the status quo do not necessarily behave inefficiently by doing so.").
53. See generally Chris Guthrie & David F. Sally, Miswanting, in THE NEGOTIATOR'S FIELDBOOK 277 (Andrea Kupfer Schneider & Christopher Honeyman eds., 2006).
54. See Daniel T. Gilbert et al., The Trouble with Vronsky: Impact Bias in the Forecasting of Future Affective States, in THE WISDOM IN FEELING: PSYCHOLOGICAL PROCESSES IN EMOTIONAL INTELLIGENCE 114, 116 (Lisa Feldman Barrett & Peter Salovey eds., 2002);
55. Timothy D. Wilson & Daniel T. Gilbert, Affective Forecasting, 35 ADVANCES EXPERIMENTAL SOC. PSYCHOL. 345, 351 (2003).
56. See Philip Brickman et al., Lottery Winners and Accident Victims: Is Happiness Relative?, 36 J. PERSONALITY & SOC. PSYCHOL. 917, 920-21 (1978).
57. Id.; see also John Bronsteen et al., Hedonic Adaptation and the Settlement of Civil Lawsuits, 108 COLUM. L. REV. 1516, 1538-40 (2008) (reviewing literature).
58. Matthew Adler & Eric A. Posner, Happiness Research and Cost-Benefit Analysis, 37 J. LEGAL STUD. S253, S257 (2008).
59. See, e.g., Norbert Schwarz et al., Global and Episodic Reports of Hedonic Experience, in CALENDAR AND TIME DIARY: METHODS IN LIFE COURSE RESEARCH 157, 159 (Robert F. Belli et al. eds., 2009).
60. See, e.g., Daniel Kahneman et al., A Survey Method for Characterizing Daily Life Experience: The Day Reconstruction Method, 306 SCIENCE 1776, 1777 tbl.1 (2004);
61. Sonja Lyubomirsky & Julia K. Boehm, Human Motives, Happiness, and the Puzzle of Parenthood: Commentary on Kenrick et al., 5 PERSP. ON PSYCHOL. SCI. 327, 330 (2010) ; Schwartz et al., supra note 57, at 166-67;
62. Debra Umberson et al., Parenthood, Childlessness, and Well-Being: A Life Course Perspective, 72 J. MARRIAGE & FAM., 612, 613-14 (2010).
63. See, e.g., CABLE NEWS NETWORK, CNN POLL (2006) (on file with author) (stating that eighty-seven percent of respondents said that having children made them "much happier" or a "little bit happier" in life);
64. MASS. MUT. LIFE INS. CO., FAMILY VALUES SURVEY (1991) (on file with author) (stating that sixty-nine percent of respondents "agree strongly" or "agree somewhat" with the statement: "My children are the main satisfaction in my life");
65. PEW RESEARCH CM, PEW SOCIAL TRENDS POLL (2007) (on file with author) (stating that thirty-one percent of respondents rate their relationship with their minor or adult children as the factor "most important to your personal happiness and fulfillment[,]" trailing only their relationship with their spouse (thirty-two percent));
66. READER'S DIGEST, READERS' DIGEST POLL (1992) (on file with author) (stating that seventy-seven percent of respondents "strongly agree" or "somewhat agree" with the statement: "Having children makes a person's life happier overall").
67. John Bronsteen, Christopher Buccafusco & Jonathan S. Masur, Welfare As Happiness, 98 GEO. L. J. 1583, 1585-88 (2010).
68. See Jeffrey J. Rachlinski, Cognitive Errors, Individual Differences, and Paternalism, 73 U. CHI. L. REV. 207, 208 (2006) (claiming that behavioral law and economics scholars "have largely assumed that consumers share identical cognitive processes and vulnerabilities").
69. See Daniel Kahneman & Amos Tversky, Choices, Values and Frames, 39 AM. PSYCHOLOGIST 341, 343 (1984).
70. Daniel Kahneman, Maps of Bounded Rationality: Psychology for Behavioral Economics, 93 AM. ECON. REV. 1449, 1450-52 (2003) (providing a revised version of his Nobel address);
71. see also KELMAN, supra note 22, at 33 (calling this the "dominant general story about the place of heuristic thinking in overall cognition").
72. The labels were coined by Stanovich and West. See Keith E. Stanovich & Richard F. West, Individual Differences in Reasoning: Implications for the Rationality Debate?, 23 BEHAV. & BRAIN SCI. 645, 658 (2000).
73. See generally Gerd Gigerenzer & Daniel G. Goldstein, Reasoning the Fast and Frugal Way: Models of Bounded Rationality, 103 PSYCHOL. REV. 650 (19%).
74. For discussions of some of this evidence, see KELMAN, supra note 22, at 34-36; Rachlinski, supra note 63, at 216-19.
75. Shane Frederick, Cognitive Reflection and Decision Making, 19 J. ECON. PERSP., Fall 2005, at 25, 25-26, 41.