Refounding Law and Economics: Behavioral Support for the Predictions of Standard Economic Analysis

Eyal Zamir*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Based on the premise that people are rational maximizers of their own utility, economic analysis has a fairly successful record in correctly predicting human behavior. This success is puzzling, given behavioral findings that show that people do not necessarily seek to maximize their own utility. Drawing on studies of motivated reasoning, self-serving biases, and behavioral ethics, this article offers a new behavioral foundation for the predictions of economic analysis. The behavioral studies reveal how automatic and mostly unconscious processes lead well-intentioned people to make self-serving decisions. Thus, the behavioral studies support many of the predictions of standard economic analysis, without committing to a simplistic portrayal of human motivation. The article reviews the psychological findings, explains how they provide a sounder, complementary foundation for economic analysis, and discusses their implications for legal policymaking.

Original languageAmerican English
Pages (from-to)267-299
Number of pages33
JournalReview of Law and Economics
Volume16
Issue number2
DOIs
StatePublished - 1 Jul 2020

Bibliographical note

Publisher Copyright:
© 2020 Walter de Gruyter GmbH, Berlin/Boston 2020.

Keywords

  • agency problem
  • behavioral ethics
  • behavioral law and economics
  • bounded ethicality
  • motivated reasoning
  • motivational rationality
  • normative economics
  • positive economics
  • self-serving biases

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