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Sunday, December 13, 2009

Super Behavioral Law and Economics

Levitt and Dubner have super-sized their hit. And in the legal academy, behavioral law and economics is entering the next generation. Avishalom Tor, at the law faculty of Haifa University, organized this week a fantastic and intense conference, Behavioral Analysis of Law: Markets, Institutions, and Contracts.

One of the conference participants Kim Kraweic (Duke) wrote a very nice and comprehensive post about the conference. You can read it here at the faculty lounge, and I will just highlight a couple of themes. First, as my favorite behavioral economist and I have recently argued in Stumble, Predict, Nudge: How Behavioral Economics Informs Law and Policy, Columbia Law Review (2008), behavioral law and economics generally presumes the ability of legal design and policy to increase rational choices, thereby improving overall welfare. Yet, next generation behavioral studies reveal a range of types of behavioral insights, some of which are better  translated into law reform than others. On Amir and I develop a distinction between Type 1 biases, which are sourced in our automatic systems and stem from reflexive or intuitive processes, and Type 2 biases, which are generated from irrationalities in the reflective system meant to override our automatic responses, and argue that cognitive errors are more readily corrected through policy when sourced in Type 1 biases. I think the papers at the Haifa conference demonstrate these complexities and provide new insights into the way law interacts with behavior, motivation and decision-making.

At the Haifa conference, I presented the forthcoming article with my repeat collaborator, Yuval Feldman (anyone currently in Israel can catch me presenting the piece next week at ILSA, Tel-Aviv). The article The Incentives Matrix: A Study of the Comparative Effectiveness of Monetary Rewards as Compliance Systems, forthcoming, Texas Law Review (2010) we report on our experimental study of a representative panel of over 2000 employees (we received a generous grant from the ABA Litigation Section Research Fund 2008-2009). The experiment compares the effects of different regulatory mechanisms - monetary rewards, protective rights, positive obligations, and liabilities - on individual motivation and behavior. We look at the comparative advantages of these mechanisms in incentivizing individual whistleblowing. Several cool findings about the costs and benefits of different regulatory mechanisms: we find inadvertent counterproductive effects of offering monetary rewards in some cases, leading to less, rather than more, reporting of illegality -- in line with the behavioral crowding out literature in the psychology of motivation. We also find the existence of a "holier than thou" effect, where basically all of us believe we are much more ethical than average. We also show that people are bad predictors of their own motivations. A finding that always gets alot of interest is our showing of robust gender differences among whistleblowers, demonstrating that women tend to respond more to protections and duties while men respond more to money. 

A final note -  Tor himself, the organizer of the Haifa conference, was exceptionally generous in taking himself off the rich program to give the forum to the rest of us to present and discuss our work. But Tor has important behavioral research, including these two articles in Psych Science on competition and the effect of social comparison on motivation.

 

 

Posted by Orly Lobel on December 13, 2009 at 01:43 AM in Orly Lobel | Permalink

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