Commentators have expressed concern that hindsight bias may distort legal fact finding. The worry is that the fact finder, seeing that an accident has occurred, will be too quick to conclude that the accident was likely to have occurred, and thus too quick to hold defendants liable. There is good reason to believe that this form of across-person hindsight bias does affect decision making. But the application of this finding to legal process has been hampered by the failure adequately to separate across-person hindsight bias from a confounding rational use of outcome information in judging others’ beliefs. This rational use arises in the case that the defendant was “in a position to know” and now has reason to be less than forthcoming—a case of particular interest to law. Under those conditions, rational probabilistic reasoning dictates that the fact finder, on seeing that the accident did in fact occur, increase its assessment of how likely a reasonable defendant would have thought the accident to be ex ante. The interaction between this rational use of outcome information, on the one hand, and across-person hindsight bias, on the other, may produce surprising normative implications. Hindsight bias would, for example, be beneficial if it corrected for fact finders’ cognitive error in not putting outcome information to its rational use.
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Paper provided by EconWPA in its series Law and Economics with number
0403004.
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