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It is strongly recommended that you include your outline in the body of your essay by using the outline as section titles. The headings below are there to remind you how section and subsection titles are formatted. |
| | -- By MichaelDuignan - 06 Apr 2010 |
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< | Neoclassical economics has, over a half century, come to exert great influence over legal structures. As a positive system, it provides mathematical precision to legal thinking. As a normative system, it shapes vast areas of law dealing with transaction and choice. Some wonder if its legal influence, however, has reached a zenith. As new tools enable researchers to learn more about the human brain and its cognitive limitations, some economists have begun to question the assumptions neoclassical economics made considering human nature. If a social theory is ultimately valued by how well it explains the forces guiding human behavior, this essay considers just how the answers to these questions might impact normative principles anchored to the neoclassical model. |
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> | Neoclassical economics has, over a half century, come to exert great influence over legal structures. As a positive system, it lends mathematical precision to legal thinking. As a normative system, it shapes vast areas of law dealing with transaction and choice. Some wonder if its legal influence, however, has reached a zenith. As new tools enable researchers to discover the human brain and its cognitive limitations, some economists now question the assumptions neoclassical economics made concerning human nature. If a social theory is ultimately valued by how well it explains the forces guiding human behavior, this essay considers how such questioning might affect normative principles anchored to the neoclassical model. |
| | The Hand formula |
| | Rational Choice Theory and the Law |
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< | The debate over rational choice theory is fiercest at the U. of Chicago, with Richard Posner representing the traditional law and economics movement, and Richard Thaler leading a mutiny in the developing field of behavioral economics (“developing,” because, as of yet, the field is without a formal theory). |
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> | The debate is fiercest at U. of Chicago, with Richard Posner representing the traditional law and economics movement, and Richard Thaler leading the developing field of behavioral economics (developing, because, as of yet, the field is without a formal theory). |
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< | According to Posner, the full range of human psychology can be sufficiently explained within rational choice theory. Fellow Chicagoan Gary S. Becker in his 1976 essay The Economic Approach to Human Behavior said, “[A]ll human behavior can be viewed as involving participants who [1] maximize their utility [2] from a stable set of preferences and [3] accumulate an optimal amount of information and other inputs in a variety of markets.” (p. 14). Though generally accepted, the breadth of this rule has invited challenge ever since. |
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> | According to Posner, the full range of human psychology can be sufficiently explained within rational choice theory. Fellow Chicagoan Gary S. Becker in his 1976 paper The Economic Approach to Human Behavior said, “[A]ll human behavior can be viewed as involving participants who [1] maximize their utility [2] from a stable set of preferences and [3] accumulate an optimal amount of information and other inputs in a variety of markets. At 14. Though generally accepted, the universality of the rule has invited challenge ever since. |
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< | Conversely, Thaler asserts certain peculiarities of human nature, though predictable, lie outside the scope of the traditional model. In so many words, this view posits that, the more evidence showing human decision-making processes differ from neoclassical presumptions, the less explanatory power the traditional model retains. |
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> | Thaler, along with Cass Sunstein and Christine Jolls in A Behavioral Approach to Law and Economics, counters that certain peculiarities of human nature, though predictable, lie outside the scope of the traditional model. In so many words, the more evidence one can produce showing human decisions do not mirror neoclassical presumptions, the less explanatory power the traditional model retains as applied to the law. At 1474. |
| | Reasonable persons, in spite of ourselves |
| | Choice as a double edged sword |
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< | Under the rational choice theory, multiple consumption options increase the chance that a given consumer will be able to find a choice suitable to his or her fixed preferences. However, Ariely suggests that benefit may be illusory, because the availability of choices may actually be guiding the preferences of the individual. Anyone who has ever entered a supermarket with one item in mind, and left carrying a completely dissimilar item, might relate to this latter view. |
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> | Under the rational choice theory, multiple consumption options increase the chance that a given consumer will be able to find a choice suitable to his or her fixed preferences. However, Ariely suggests that benefit may be illusory, because the availability of choices may actually be guiding the preferences of the individual. Obviously, this idea bears great significance on generally accepted notions of personal autonomy. Yet, anyone who's ever entered a supermarket with one item in mind, and left carrying a something else altogether, might be able to entertain the prospect of this latter view. |
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< | General Implications for the Normative System |
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> | General Implications for Normative Systems |
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< | The more we as human beings come to understand our cognitive function, the more we recognize rigid definitions of rationality do not comport with the world as it is. Lacking a formal theory of their own, behavioral economists will keep poking holes in rational choice theory. Neoclassical economists will continue to play Whac-A-Mole with by crafting clever ways to fit behavioral economists' debilitative findings into the confines of rational choice theory. This competition between the dominant intellectual regime and the experimental uprising will likely continue to frame the debate between libertarian and paternalistic regulatory approaches for some time to come. |
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> | As Thaler et al did not profess to have an answer to rational choice theory, so long as behavioral economics lacks a formal theory of its own, the movement is limited to poking holes in the neoclassical model. Neoclassical economists will likely respond with the tested Whac-A-Mole approach: reinterpret rational choice theory in increasingly clever ways to explain away the behavioral economists' findings as they arise.
Ideally, this debate engenders productive results for the law and economic movement, by encouraging it to reconsider and revise its premises, thereby strengthening the structure and the legal principles that depend on it. But, if one adopts the views of Thurman Arnold, the escalating debate might signal the rumblings of an intradisciplinary holy war through which a new set of economic principles emerges. As an aspiring lawyer, the latter scenario presents both an exciting and disconcerting prospect, in that neoclassical assumptions undergird great real estate beneath contract, criminal and property law.
...the debate between libertarian and paternalistic ... |
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