Debiasing through Law
AbstractIn many settings, human beings are boundedly rational. A distinctive and insufficiently explored legal response to bounded rationality is to attempt to "debias through law," by steering people in more rational directions. In many important domains, existing legal analyses emphasize the alternative approach of insulating outcomes from the effects of boundedly rational behavior, often through blocking private choices. In fact, however, a large number of actual and imaginable legal strategies are efforts to engage in the very different approach of debiasing through law by reducing or even eliminating people's boundedly rational behavior. In important contexts, these efforts to debias through law can avoid the costs and inefficiencies associated with regulatory approaches that take bounded rationality as a given and respond by attempting to insulate outcomes from its effects. This paper offers a general account of how debiasing through law does or could work to address legal questions across a range of areas, from consumer safety law to corporate law to property law. Discussion is also devoted to the risks of government manipulation and overshooting that are sometimes raised when debiasing through law is employed.
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Date of creation: Nov 2005
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Find related papers by JEL classification:
- K00 - Law and Economics - - General - - - General (including Data Sources and Description)
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-12 (All new papers)
- NEP-LAW-2005-11-12 (Law & Economics)
- NEP-REG-2005-11-12 (Regulation)
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