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Accessible Unlicensed Requires Authentication Published by De Gruyter December 7, 2019

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

Eyal Zamir
From the journal Review of Law & Economics

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.

JEL Classification: A13; D00; D03; D64; K00

Acknowledgements

I am grateful to Raanan Sulitzeanu-Kenan for numerous fruitful discussions, to Oren Bar-Gill, Yuval Feldman, Ori Katz, Ariel Porat, Eric Posner, David Pozen, Yuval Procaccia, and Doron Teichman, as well as the participants of the annual meeting of the American Law and Economics Association (Boston, 2018) and the annual conference of the European Association of Law and Economics (Milan, 2018) for helpful comments on earlier drafts, and to Roi Yair for excellent research assistance. This research was supported by the I-CORE Program of the Planning and Budgeting Committee and the Israel Science Foundation (Grant No. 1821/12).

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Published Online: 2019-12-07

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