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

Author

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  • Zamir Eyal

    (Faculty of Law, Hebrew University of Jerusalem, Mt. Scopus, Jerusalem9190501, Israel)

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.

Suggested Citation

  • Zamir Eyal, 2020. "Refounding Law and Economics: Behavioral Support for the Predictions of Standard Economic Analysis," Review of Law & Economics, De Gruyter, vol. 16(2), pages 1-35, July.
    • Handle: RePEc:bpj:rlecon:v:16:y:2020:i:2:p:35:n:3
    DOI: 10.1515/rle-2019-0023
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    More about this item

    Keywords

    agency problem; positive economics; normative economics; behavioral law and economics; bounded ethicality; behavioral ethics; motivational rationality; self-serving biases; motivated reasoning;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D00 - Microeconomics - - General - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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