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The Limits of Behavioral Economics in Tort Law

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  • Pi Daniel

    (University of Maine, School of Law, 246 Deering Ave., Portland, ME 04102, USA)

Abstract

Skeptics of rational choice theory have long predicted that behavioral economics would radically transform the legislation, adjudication, and analysis of law. Using tort law as an exemplar, this Article maps out the narrow set of conditions where substantive law can be modified to accommodate irrational decision-makers. Specifically, this Article demonstrates that if injurers are systematically biased, and the due care standard can be expressed quantitatively, and victims are unable to take meaningful precautions, then imposing punitive damages can induce irrational injurers to exercise efficient precautionary care. In all other cases, it is better that the law adopt a presumption of rationality, regardless whether individuals behave rationally in fact.

Suggested Citation

  • Pi Daniel, 2021. "The Limits of Behavioral Economics in Tort Law," Review of Law & Economics, De Gruyter, vol. 17(2), pages 323-347, July.
    • Handle: RePEc:bpj:rlecon:v:17:y:2021:i:2:p:323-347:n:10
    DOI: 10.1515/rle-2021-0076
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    More about this item

    Keywords

    behavioral law and economics; irrationality; tort law; D03; K13;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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