Monday, June 5, 2017
In 1998, Christine Jolls, Cass Sunstein, and Richard Thaler published A Behavioral Approach to Law and Economics, one of the most important pieces of scholarship in decades. Their Article famously proposes a departure from the classical law and economics approach to legal analysis. Breaking from classical law and economics’ rational actor construct, the authors apply empirical insights about human behavior to introduce the concept of a boundedly rational actor limited by cognitive constraints. Over the past two decades, the behavioral law and economics approach, with its focus on the boundedly rational actor, has contributed needed realism to legal analyses.
Unfortunately, the current approach to behavioral law and economics is incomplete. Indeed, sometimes it even conflicts with empirical lessons about how the brain actually works.
In this Article, I take the first step in remedying this oversight. Drawing on the insights of neuroscience, I explain why rationality is endogenous and dynamic and what this means for behavioral law and economics. Working from examples in advertising and criminal law, I explain that dynamic rationality can and should be accounted for. Doing so will increase the prescriptive and normative power of behavioral law and economics and prevent policies from being introduced that undermine rather than advance social welfare.