In the past few decades, economic analysis of law has been challenged by a growing body of experimental and empirical studies that attest to prevalent and systematic deviations from the assumptions of economic rationality. While the findings on bounded rationality and heuristics and biases were initially perceived as antithetical to standard economic and legal-economic analysis, over time they have been largely integrated into mainstream economic analysis, including economic analysis of law. Moreover, the impact of behavioral insights has long since transcended purely economic analysis of law: in recent years, the behavioral movement has become one of the most influential developments in legal scholarship in general. Behavioral Law and Economics offers a state-of-the-art overview of the field. The book surveys the entire body of psychological research underpinning behavioral analysis of law, and critically evaluates the core methodological questions of this area of research. The book then discusses the fundamental normative questions stemming from the psychological findings on bounded rationality, and explores their implications for establishing the aims of legislation, and the means of attaining them. This is followed by a systematic and critical examination of the contributions of behavioral studies to all major fields of law—property, contracts, consumer protection, torts, corporate, securities regulation, antitrust, administrative, constitutional, international, criminal, and evidence law—as well as to the behavior of key players in the legal arena: litigants and judicial decision-makers.

Public choice theory (PCT) has had a powerful influence on political science and, to a lesser extent, public administration. Based on the premise that public officials are rational maximizers of their own utility, PCT has a quite successful record of correctly predicting governmental decisions and policies. This success is puzzling in light of behavioral findings showing that officials do not necessarily seek to maximize their own utility. Drawing on recent advances in behavioral ethics, this article offers a new behavioral foundation for PCT ' s predictions by delineating the psychological processes that lead well-intentioned people to violate moral and social norms. It reviews the relevant findings of behavioral ethics, analyzes their theoretical and policy implications for officials ' decision making, and sets an agenda for future research.

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Economic analysis of law is a powerful analytical methodology. However, as a purely consequentialist approach, which determines the desirability of acts and rules solely by assessing the goodness of their outcomes, standard cost-benefit analysis (CBA) is normatively objectionable. Moderate deontology prioritizes such values as autonomy, basic liberties, truth-telling, and promise-keeping over the promotion of good outcomes. It holds that there are constraints on promoting the good. Such constraints may be overridden only if enough good (or bad) is at stake. While moderate deontology conforms to prevailing moral intuitions and legal doctrines, it is arguably lacking in methodological rigor and precision. This book examines the possibility of combining economic methodology and deontological morality through explicit and direct incorporation of moral constraints (and options) into economic models. It argues that the normative flaws of economic analysis can be rectified without relinquishing its methodological advantages, and that moral constraints can be formalized so as to make their analysis more rigorous. The book discusses various substantive and methodological choices involved in modeling deontological constraints. It proposes to determine the permissibility of any act or rule infringing a deontological constraint by means of mathematical threshold functions. The book presents the general structure of threshold functions, analyzes their elements, and addresses possible objections to this proposal. It then illustrates the implementation of constrained CBA in several legal fields, including the fight against terrorism, freedom of speech, anti-discrimination law, contract law, and legal paternalism.

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