Behavioral Approaches to Law and Economics.

• Position: National Bureau of Economic Research conference

A group of economists and academic lawyers gathered in Cambridge on November 14 for the NBER's first "Conference on Behavioral Approaches to Law and Economics." The conference was organized by Robert Gertner and Richard H. Thaler, of NBER and the University of Chicago; Christine M. Jolls, NBER and Harvard University; and Cass Sunstein, University of Chicago. The daylong program was:

Christine M. Jolls, Cass Sunstein, and Richard H. Thaler, "A Behavioral Approach to Law and Economics"

Discussant: Steven D. Levitt, NBER and University of Chicago

Russell Korobkin, University of Illinois, "The Status Quo Bias and Contract Default Rules"

Discussant: Richard Zeckhauser, NBER and Harvard University

Jeffrey Rachlinski, Cornell University, "A Positive Psychological Theory of Judging in Hindsight"

Discussant: Louis Kaplow, NBER and Harvard University

Daniel Kahneman, Princeton University; David Schkade, University of Texas, Austin; and Cass Sunstein, "Shared Outrage and Erratic Awards: the Psychology of Punitive Damages"

Discussant: Alan Schwartz, Yale University

Peter A. Diamond, NBER and MIT, "Efficiency Effects of Punitive Damages" and "Integrating Punishment and Efficiency Concerns in Punitive Damages for Reckless Disregard of Risks to Others"

Discussant: Robert Gertner

Linda Babcock and Gregory Pogarsky, Carnegie-Mellon University, "Damage Caps Cast a Long Shadow: An Experimental Investigation of Their Impact on Expectations and Settlement"

Discussant: Samuel Isaacharoff, University of Texas, Austin

Jolls, Sunstein, and Thaler offer a broad vision of how law and economics analysis may be improved by increased attention to insights about actual human behavior. Their analysis falls into three categories: positive, prescriptive, and normative. Positive analysis of law focuses on how agents behave in response to legal rules, and how legal rules are produced; here, they suggest that a behavioral approach improves predictions. Prescriptive analysis deals with what rules should be adopted to advance agreed-upon ends; here, they offer alternatives to standard law and economics prescriptions based on behavioral insights into the seemingly pernicious or counterproductive effects of the standard proposals. Finally, normative analysis attempts to assess more broadly the ends of the legal system: for example, should the system always respect people's choices, and what is the appropriate domain of paternalism?

The rich law and economics literature on contract...