It gives me pleasure to introduce you [the first year law students] with Professor Doron Teichman of the Hebrew University Faculty of Law who has kindly agreed to be here to give a presentation to you on The Oxford Handbook on Behavioural Economics and Law (Oxford, 2014) – a new book that he jointly edited with Eyal Zamir.
Professor Teichman is a SJD of Michigan University and has strong interest in economic analysis of law. The new book that he has co-edited, and has twenty-nine chapters from different authors in this area, brings together leading scholars of law, psychology, and economics. The idea is to provide an up-to-date analysis of the theme of behavioural economics and law in the modern context. The book concentrates on both the strengths and limitations of the theme as well as a forecast of its future development.
Law and economics are often overlapping when explaining whether legal systems are economically efficient or need to be modified or improved. Microeconomics, more specifically, provides insight into the analysis of contemporary legal problems, political economy, constitutional economics, and political science. While different schools of thought may analyze the same issues and cases as does “law and economics,” often, they originate from vastly different perspectives. Behavioral economics and finance study how individuals’ and institutions’ economic decisions are influenced by other factors that can, for example, be psychological, social, or emotional. It also studies how these changes in behavior effect components of the market, like prices, returns, and the allocation of resources, which is a fundamental issue in the study of economics. As is implied, behavioral economics examines how rationality plays into the decisions individuals’ and institutions’ make and the causes behind those decisions. Behavioral economics integrates components of other sciences, such as psychology, neuroscience, and microeconomic theory, making this field of study very diverse in its approach.
Behavioral economics has had an increased influence on US scholarly papers, thanks to its three fundamental themes: heuristics, which states that people do not always use logic but approximate rules of thumb to make their decisions, framing, or how a people’s biases can influence how they interpret and respond to events, and lastly, market inefficiencies, like mis-pricings and irrational decision making. The Oxford Handbook on Behavioural Economics and Law provides an insightful introduction to and criticisms of the influence of behavioral economics on legal theory. Furthermore, it also discusses how extant law has co-opted various specific aspects of behavioral phenomena in legal policymaking. Lastly, the book analyses how behavioral economics has influenced specific areas of the legal sphere, like contracts, property, taxation, and antitrust policy.
The “law and economics” movement in jurisprudence is an important stream of thought in the application of economic theory (specifically microeconomic theory) in the analysis of law. Economic concepts are used to explain the effects of laws. They are used to assess which legal rules are economically efficient, and as such needs to be promulgated. This brings in the application of microeconomic analysis to contemporary legal problems. Economic analysis is also relevant in political economy, constitutional economics and political science. Approaches to the same issues from Marxist and critical theory/Frankfurt School perspectives usually do not identify themselves as “law and economics”. For example, research by members of the critical legal studies movement and the sociology of law considers many of the same fundamental issues as does work labeled “law and economics,” though from a vastly different perspective.
Behavioral economics and the related field, behavioral finance, study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation. Behavioral economics is primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology, neuroscience and microeconomic theory; in so doing, these behavioral models cover a range of concepts, methods, and fields.[2][3] Behavioral economics is sometimes discussed as an alternative to neoclassical economics. The study of behavioral economics includes how market decisions are made and the mechanisms that drive public choice.
The use of “Behavioral economics” in U.S. scholarly papers has increased in the past few years as a recent study shows. There are three prevalent themes in behavioral finances: heuristics: People often make decisions based on approximate rules of thumb and not strict logic; Framing: the collection of anecdotes and stereotypes that make up the mental emotional filters individuals rely on to understand and respond to events; and Market inefficiencies: These include mis-pricings and non-rational decision making.
The book is the first comprehensive and systematic introduction to behavioral legal studies. The second part comprises four chapters introducing and criticizing the contribution of behavioral economics to legal theory. The third part discusses specific behavioral phenomena, their ramifications for legal policymaking, and their reflection in extant law. Finally, the fourth part analyzes the contribution of behavioral economics to fifteen legal spheres ranging from core doctrinal areas such as contracts, torts, and property to areas such as taxation and antitrust policy.
You are welcome to interact with Professor Teichman following his presentation. Thank you !
