ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, October 11, 2007

Teaching Assistants: Alan M. White

WhiteIf you are looking for a clear, concise, well-written review of rational choice theory as it relates to consumer contracts, as well as a critique of that theory from the perspective of behavioral economics, the rational choice is to read Behavior and Contract, written by my new colleague, Alan White (pictured at left).

Alan's key observation, it seems to me, is that while law and economics has incoporated many of the insights of behavioral scientists, "behavioral law and economics has clung stubbornly to goals of efficiency and autonomy."  (3)  In order to advance these goals, rational choice theorists, who have come to influence legislators and government agencies empowered to implement consumer protection laws, advocate deregulation, which, according to Alan, "produces significant consumer harm, exploitation and rent-seeking, and does not necessarily increse consumer welfare." (5)  Orthodox law and economics scholarship thus fails to achieve its stated goals and that failure, Alan urges, ought to cause us to question "the impoverished norm of efficiency."  (6) 

This is all quite provocative stuff, and there are of course articles on the other side (for example, this one).  But the great advantage of Alan's piece (and the reason why I recommend it as a teaching assistant) is that he clearly and succinctly: (1) summarizes the rational choice model; (2) introduces the major insights from behavioral law and economics that undermine the rational choice model; and (3) reviews various attempts by both scholars and regulators to operationalize the insights of behavioral law and economics so as to provide better consumer protections in the contractual realm.  Alan provides a menu of options and acknolwedges that none fully addresses the various issues raised by the behavioral sciences.  Ultimately, Alan would replace the norm of efficiency with a trio of utliitarian sufficiency, autonomy and equity. (50-51)  The competing norms complicate the task of consumer regulation, as Alan's model is not nearly as parsimonious as the rational choice model.  But Alan is willing to trade parsimony for a model that more accurately reflects the circumstances in which consumers make choices.  He advocates a return to regulation and rejects accusations of paternalism: "Consumer's choices will be framed either by sellers or by legal rules.  Allowing the consumers the freedom and autonomy to be manipulated and exploited does not promote autonomy." (50)

[Jeremy Telman]

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