Symposium

Last updated on Apr 03, 2013

Free to Choose Symposium

A Symposium on Behavioral Law and Economics

The rise of behavioral economics, and in turn, behavioral law and economics, has been one of the most significant developments in either field in a remarkably short period of time.  In 2010, Nudge is a household name, “libertarian paternalism” is (a hotly debated) a term of art, and behavioral economics has taken made its way from articles, journals and popular books and into the policy and regulatory landscape.  In the United States, Cass Sunstein — one of the godfather’s of the Nudge — heads OIRA, the Consumer Financial Protection Bureau is founded on a behavioral approach to consumer credit envisioned by Elizabeth Warren and Oren Bar-Gill, and behavioral economics appears to have gained traction within the Obama administration.  But behavioral law and economics is not a phenomenon limited to the United States.  Indeed, a “Nudge Unit” has been created in David Cameron’s cabinet.

To give some historical perspective on the speed with which the rise of behavioral economics and behavioral law and economics has occurred, consider that just thirty years ago, Milton Friedman launched the PBS television series “Free to Choose” and published a book by the same title.  Consistent with Friedman’s central ideas, both the television series and book advocated reliance on the individualized, dispersed power of markets rather than the consolidated power government to protect consumer and workers and fuel innovation and economic growth.  Thirty years later, the power of Friedman’s ideas and the ongoing development of markets around the world might have been expected to lead to the spread of this philosophy.  Indeed, the final chapter of Free to Choose was entitled “Turning the Tide,” and discussed Friedman’s view (along with his co-author and wife, Rose) that public opinion was “shifting away from a belief in collectivism and toward a belief in individualism and private markets.”  Central to Friedman’s work was the view that the economic costs of substituting the judgment of government bureaucrats and regulators for those of individuals, even when the individuals could be expected to err, would far outstrip any benefits of such an approach.

The topic of the symposium is necessarily broad.  Behavioral economics itself has made a significant contribution to increasing our understanding of when individual decision-making deviates from the rationality assumption at the heart of the conventional microeconomic theory.   Behavioral law and economics now reaches all corners of the law.  The rise of behavioral economics raises interesting sets of questions both within the domain of economics itself: what are the costs and benefits of the intersection of psychology and economics?  What explains the remarkable success of behavioral economics in the behavioral law and economics literature?  Will the phenomenon have staying power?  Is it in fact the case that behavioral law and economics is gaining traction in the current regulatory landscape?  We do have the Consumer Financial Protection Bureau.  But what else?  On the specifics, what are the sorts of behavioral law and economic policy prescriptions in other areas of the law such as antitrust, consumer protection, and intellectual property?   Would such interventions be successful?   Will there be long-term costs of approaches built on the concept that one can rely on the the government to correct decision-making errors?  And further, has the implementation of regulatory proposals by the behavioral law and economics camp in practice remained faithful to the insights produced by the behavioral economics literature in theory, laboratory experiments and the field?  Or have proposed “nudges” merely take the form of default rules which map onto the policy preferences of the academic advocate?

The easy part is to raise the questions.  Hopefully, I’ve highlighted a few of the interesting ones here.  There are plenty more.  Truth on the Market Free to Choose Symposium is designed to begin a intellectual dialogue on these and related topics, bringing together legal scholars and economists with a variety of perspectives on these issues in terms of both methodology and subject-matter expertise.   We are hopeful that the discussion is a starting point in identifying areas of agreement, causes for concern, and open questions for future research agendas.

In This Symposium

In This Symposium

David Friedman on Behavioral Economics: Intriguing Research Project, with Reservations

I have long argued that the economic assumption of rationality is useful not because it is a complete and correct description of real world behavior but because it describes that part of behavior that is predictable. If half the time an individual takes the actions that best achieve his goals and half the time he ... David Friedman on Behavioral Economics: Intriguing Research Project, with Reservations

Larry Ribstein on Free to Lose?

Larry E. Ribstein is the Mildred Van Voorhis Jones Chair in Law and the associate dean for Research, University of Illinois College of Law I thought I’d aim my opening post at the question that motivated my interest in this symposium:  is behavioral economics leading us to the end of free markets and the takeover ... Larry Ribstein on Free to Lose?

David Levine on Behavioral Economics: The Good, the Bad and the Middle Ground

Behavioral economics: love it or hate it – there seems to be no middle ground. Lovers take the obvious fact people are not frictionless maximizing machines together with the false premise that economists assume that they are to conclude that all of economics must be wrong. The haters take the equally obvious fact that laboratories ... David Levine on Behavioral Economics: The Good, the Bad and the Middle Ground

Henry Manne on Behavioral Overreach

Henry G. Manne is Dean Emeritus at George Mason University School of Law Behavioral Economics, like so many efforts previously to upend the hegemony of the neo-classical market model, will leave some footprints on the intellectual sands of time.  However, there is no way that it can accomplish what many of its disciples seem, subliminally ... Henry Manne on Behavioral Overreach

Geoffrey Manne on Interesting doesn’t necessarily mean policy relevant

Geoffrey A. Manne is Executive Director of the International Center for Law & Economics and Lecturer in Law at Lewis & Clark Law School The problem with behavioral law and economics (and its behavioral economics cousin) is not that it has nothing interesting to say, but rather that the interesting things it has to say ... Geoffrey Manne on Interesting doesn’t necessarily mean policy relevant

Thom Lambert on Behavioral Law and Economics and the Conflicting Quirks Problem: A “Realist” Critique

Thom Lambert is Associate Professor of Law at the University of Missouri Behavioralism is mesmerizing.  Ever since I took Cass Sunstein’s outstanding Elements of the Law course as a 1L at the University of Chicago Law School, I’ve been fascinated by studies purporting to show how humans are systematically irrational. It is, of course, the “systematic” part that’s ... Thom Lambert on Behavioral Law and Economics and the Conflicting Quirks Problem: A “Realist” Critique

Sprigman and Buccafusco on Valuing Intellectual Property

We would like to start by thanking Josh for inviting us to participate in what promises to be a fascinating discussion on an important subject.  We’re looking forward to engaging with the other members of the symposium. To begin with, we would like to talk about some of our own experimental research on the valuation ... Sprigman and Buccafusco on Valuing Intellectual Property

Judd Stone on Misbehavioral Economics: The Misguided Imposition of Behavioral Economics on Antitrust

Behavioral law and economics has arisen to international prominence; between Cass Sunstein’s appointment to head the Office of Information and Regulatory Affairs the United Kingdom’s appointment of a “nudge” bureau, behavioralism has enjoyed a meteoric impact on policymakers.  Thus far, behavioral economists have almost exclusively focused on the myriad foibles or purported cognitive errors which ... Judd Stone on Misbehavioral Economics: The Misguided Imposition of Behavioral Economics on Antitrust

Ronald Mann on Nudging from Debt

The idea that the regularity of behavioral departures from full rationality justifies regulatory intervention has rarely gained more credence than in the context of consumer finance.  The Credit CARD Act of 2009 rests on nothing so much as the supposition that cardholder decisions about spending and repayment reflect systematic misapprehension of the likely patterns of ... Ronald Mann on Nudging from Debt

Richard Epstein on The Dangerous Allure of Behavioral Economics: The Relationship between Physical and Financial Products

Richard A. Epstein is the Laurence A. Tisch Professor of Law, New York University School of Law, The Peter and Kirsten Bedford Senior Fellow, The Hoover Institution, and the James Parker Hall Distinguished Service Professor of Law, The University of Chicago. Few academic publications have had as much direct public influence on the law as ... Richard Epstein on The Dangerous Allure of Behavioral Economics: The Relationship between Physical and Financial Products

Free to Choose: Day 1 Wrapup

I’ve compiled links to the excellent posts from day 1 in here, or you can go to the Free to Choose Symposium tab at the top of the blog. Tomorrow’s lineup should be more of the same, including posts from Claire Hill, Erin O’Hara, Todd Henderson, Tom Brown, Kevin McCabe, Steve Bainbridge, Christopher Sprigman & ... Free to Choose: Day 1 Wrapup

Claire Hill on The Promise of Behavioral Law and Economics

I want to challenge what seems to be a premise of this symposium: that much of the behavioral “contribution” to economics is about people’s “mistakes” (either cognitive mistakes or “weakness of the will”) and the consequent need for paternalistic intervention.   I think the behavioral perspective has much more to offer; I also think that the ... Claire Hill on The Promise of Behavioral Law and Economics

Kevin McCabe on Behavioral Economics and the Law

Having started my career as an experimental economist I probably have a little different, but I hope complimentary, perspective on behavioral economics and other experimental programs in general. I view the difference between experimental and behavioral economics in terms of (1) what is studied, and (2) how it is studied.  Experimental economists are interested in institutional and ... Kevin McCabe on Behavioral Economics and the Law

Tom Brown on Camel Spotting — Is Behavioral Economics Really Beyond Redemption?

At the outset let me thank our hosts for inviting me to participate in what I have come to think of as Truth On The Markets’ annual symposium on topics of particular interest to me. Last year at roughly this same time, TOTM sponsored a symposium on what many surely regarded as an obscure topic, ... Tom Brown on Camel Spotting — Is Behavioral Economics Really Beyond Redemption?

Sprigman and Buccafusco on Behavioral Law and Economics and the Road from Lab to Law

In our second post, we want to discuss some of the implications of the study (the details of which we described in our first post). One of the consistent concerns about BL&E in this symposium is about the too-quick jump from data to policy. We should emphasize that we think more work needs to be ... Sprigman and Buccafusco on Behavioral Law and Economics and the Road from Lab to Law

Stephen Bainbridge on Mandatory Disclosure: A Behavioral Analysis

Mandatory disclosure is a—maybe the—defining characteristic of U.S. securities regulation. Issuers selling securities in a public offering must file a registration statement with the SEC containing detailed disclosures, and thereafter comply with the periodic disclosure regime. Although the New Deal-era Congresses that adopted the securities laws thought mandated disclosure was an essential element of securities ... Stephen Bainbridge on Mandatory Disclosure: A Behavioral Analysis

Erin O’Hara on The Free Market Side of Behavioral Law and Economics

Behavioral law and economics (“BLE”) can influence legal policy analysis and regulation in many ways.  On balance, it is not at all clear that this new paradigm undermines a policy commitment to markets.  From one vantage point, the BLE movement can be said to help preserve markets. Importantly, those using the paradigm often start with ... Erin O’Hara on The Free Market Side of Behavioral Law and Economics

Todd Henderson on Project Behavior: What the Battle is Really About

Lying in bed for the past day with a stomach bug, I’ve enjoyed reading the contributions of my friends and colleagues. Perhaps the wisest course would be to, like Leonardo DiCaprio’s character pretending to be a doctor in “Catch Me If You Can,” say “I concur” and slip back under the covers. My general views ... Todd Henderson on Project Behavior: What the Battle is Really About

Judd Stone on Behavioral Economics, Administrative Agencies, and Unintended Consequences

Professors Henderson and Ribstein touch on two theoretical failures of the behavioralist movement which both reveal the prematurity of ‘behaviorally-informed’ regulatory proposals: the behavioralist assumptions that (1) behavioral biases theoretically necessitate, or at least enable, public intervention, and (2) governmental entities can net improve individual outcomes over the status quo of unfettered, if limited, human ... Judd Stone on Behavioral Economics, Administrative Agencies, and Unintended Consequences

Ginsburg and Wright on A Taxonomy of Behavioral Law and Economics Skepticism

The behavioral economics research agenda is an ambitious one for several reasons.  The first reason is that behavioral economics requires a theory “true” preferences aside from – and in opposition to — the “revealed” preferences of the decision maker.  A second reason is that while collecting and documenting individual biases in an ad hoc fashion ... Ginsburg and Wright on A Taxonomy of Behavioral Law and Economics Skepticism

Ginsburg and Wright on Behavioral Law and Economics: the Never-Ending Quest for a Third Way

In the brave new world contemplated by the advocates of government policies informed by behavioral law and economics, many more aspects of each individual’s life will be regulated, or more stringently regulated, than at present.  Within the legal academy, the growth of the behavioral law and economics movement has been dramatic.  Surveying all legal publications ... Ginsburg and Wright on Behavioral Law and Economics: the Never-Ending Quest for a Third Way

Free to Choose Wrapup

Thanks to all of the participants for the excellent posts over the last two days.  There are a couple of excellent comment threads where the conversation continues, and I hope that over the next few days participants and readers will get a chance to comment on the posts.  Indeed, if any of the participants feel ... Free to Choose Wrapup

Richard Thaler’s Rejoinder to the TOTM Free to Choose Symposium

I have now had a chance to read through the contributions to this event and have a few thoughts to share.  I cannot, of course, reply to everything that has been said here, and in any case, most of what I would say already appears in print.  Before getting into specifics let me say one ... Richard Thaler’s Rejoinder to the TOTM Free to Choose Symposium