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It is strongly recommended that you include your outline in the body of your essay by using the outline as section titles. The headings below are there to remind you how section and subsection titles are formatted. | | | The Hand Formula | |
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< | In the 1947 case of United States v. Carroll Towing Co., J. Learned Hand put forth his eponymous formula for negligence liability. Where the burden of avoiding harm is less than the probability of the harm times the loss associated with the harm (B < P x L), the defendant who chooses not to avoid harm acts without requisite care. In that Hand introduced the idea of cost-benefit analysis as a bright line rule of tort liability, Carroll Towing represents prescient use of rational choice theory to render consistent qualitative judgments in the law. And though the Hand formula was non-binding, it retains analytical significance; it presumes a reasonable person is always capable of making rational decisions before acting. | >
> | In the 1947 case of Trash._United States v. Carroll Towing Co.Trash._, J. Learned Hand put forth his eponymous formula for negligence liability. Where the burden of avoiding harm is less than the probability of the harm times the loss associated with the harm (B < P x L), the defendant who chooses not to avoid harm acts without requisite care. In that Hand introduced the idea of cost-benefit analysis as a bright line rule of tort liability, Carroll TowingTrash? . represents prescient use of rational choice theory to render consistent qualitative judgments in the law. And though the Hand formula was non-binding, it retains analytical significance; it presumes a reasonable person is always capable of making rational decisions before acting. | | | Does the Hand formula really presume this? It certainly may impose liability on those whose precautions it finds insufficient, but it says nothing about whether reasonable people are always capable of doing that math, themselves. And while it may not bear on your overall point, it might be interesting to note that the Hand formula (or, more generally, cost-benefit analysis of tort claims) tends to be a feature of appellate cases, trial results being commonly controlled by the jury and its variably-informed understanding of the reasonable person standard (On Determining Negligence at 815). | | | The contemporary debate is fiercest at U. of Chicago, with Richard Posner representing the traditional law and economics movement, and Richard Thaler leading the developing field of behavioral economics (developing, because, as of yet, the field is without a formal theory). | |
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< | According to Posner, the full range of human psychology can be sufficiently explained within rational choice theory. Fellow Chicagoan Gary S. Becker in his 1976 paper The Economic Approach to Human Behavior said, “[A]ll human behavior can be viewed as involving participants who [1] maximize their utility [2] from a stable set of preferences and [3] accumulate an optimal amount of information and other inputs in a variety of markets." At 14. Though generally accepted, the universality of the rule has invited challenge ever since. | >
> | According to Posner, the full range of human psychology can be sufficiently explained within rational choice theory. Fellow Chicagoan Gary S. Becker in his 1976 paper Trash._The Economic Approach to Human BehaviorTrash._ said, “[A]ll human behavior can be viewed as involving participants who [1] maximize their utility [2] from a stable set of preferences and [3] accumulate an optimal amount of information and other inputs in a variety of markets." At 14. Though generally accepted, the universality of the rule has invited challenge ever since. | | | | |
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< | Thaler, along with Cass Sunstein and Christine Jolls in A Behavioral Approach to Law and Economics, counters that certain peculiarities of human nature, though predictable, lie outside the scope of the traditional model. In so many words, the more evidence one can produce showing human decisions do not mirror neoclassical presumptions, the less explanatory power the traditional model retains as applied to the law. At 1474. | >
> | Thaler, along with Cass Sunstein and Christine Jolls in Trash._A Behavioral Approach to Law and EconomicsTrash._, counters that certain peculiarities of human nature, though predictable, lie outside the scope of the traditional model. In so many words, the more evidence one can produce showing human decisions do not mirror neoclassical presumptions, the less explanatory power the traditional model retains as applied to the law. At 1474. | | | It would seem to me that as long as these peculiarities of human nature are predictable, there remains hope for a single, unified theory encompassing the facts explained by both economic theories. In fact, while I can appreciate that the two schools of thought are approaching the same subject from different perspectives, I have trouble understanding why they're presented as though at odds. Much like Arnold's understanding of the constitution as capable of supporting opposing views simultaneously, shouldn't Economics with a capital "E" be big enough to hold a Posner and a Thaler without the appearance of conflict?
Reasonable Persons, In Spite of Ourselves | |
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< | Dan Ariely, author of Predictably Irrational, delightfully exposed the relativity of choice in a social experiment. A group of 100 college students were given an advert from The Economist magazine and asked to select one of three annual subscription options: online-only for $59, print-only for $125, or print-plus-online for $125. A small portion opted for the first, none for the second, and the overwhelming majority for the third, print-plus-online option. Then, Ariely asked another group of students the same question, only this time he removed the second print-only option that no one wanted. When deciding between online-only for $59 and print-plus-online for $125, the majority of students opted for the cheaper package. | >
> | Dan Ariely, author of Trash._Predictably IrrationalTrash._, delightfully exposed the relativity of choice in a social experiment. A group of 100 college students were given an advert from The EconomistTrash? . magazine and asked to select one of three annual subscription options: online-only for $59, print-only for $125, or print-plus-online for $125. A small portion opted for the first, none for the second, and the overwhelming majority for the third, print-plus-online option. Then, Ariely asked another group of students the same question, only this time he removed the second print-only option that no one wanted. When deciding between online-only for $59 and print-plus-online for $125, the majority of students opted for the cheaper package. | | | | | | As Thaler et al did not profess to have an answer to rational choice theory, the movement remains limited to poking holes in the neoclassical model. Neoclassical economists will likely respond with the tested Whac-A-Mole approach: reinterpret rational choice theory in increasingly clever ways to explain away behavioral economists' findings as they arise. Or, seen from another angle, incorporate useful elements of behavioral economic study into rational choice theory? | |
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< | If continuity is an essential goal of a normative structure, then, ideally, this debate engenders productive results for the law and economics movement, by encouraging it to reconsider and revise its premises, thereby strengthening the structure and the legal principles that depend on it. However, Thurman Arnold in The Folklore of Capitalism posited, "[l]aws and morals and economics are always arrayed against new groups which are struggling to obtain a place in an institutional hierarchy of prestige." At 4. If one adopts this view, the escalating debate around rational choice theory might signal the rumblings of an intradisciplinary holy war through which a new set of economic principles emerges. As an aspiring lawyer, the latter scenario presents both an exciting and disconcerting prospect, in that neoclassical assumptions undergird great real estate beneath contract, criminal and property law. My plan is to stay tuned. | >
> | If continuity is an essential goal of a normative structure, then, ideally, this debate engenders productive results for the law and economics movement, by encouraging it to reconsider and revise its premises, thereby strengthening the structure and the legal principles that depend on it. However, Thurman Arnold in Trash._The Folklore of CapitalismTrash._ posited, "[l]aws and morals and economics are always arrayed against new groups which are struggling to obtain a place in an institutional hierarchy of prestige." At 4. If one adopts this view, the escalating debate around rational choice theory might signal the rumblings of an intradisciplinary holy war through which a new set of economic principles emerges. As an aspiring lawyer, the latter scenario presents both an exciting and disconcerting prospect, in that neoclassical assumptions undergird great real estate beneath contract, criminal and property law. My plan is to stay tuned. | | | Even with my limited study of Economics, I enjoyed your paper immensely. What I'd have liked to see was more tying into what these developments mean to the legal world, and/or why scholars continue to treat them as in conflict with one another rather than attempt to unify them under a single heading. Concerning the latter, perhaps I require a fuller grasp of the situation to understand a limitation on that possibility that is as yet invisible to me.
-- JohnJeffcott - 26 Apr 2010 | | | # * Set ALLOWTOPICVIEW = TWikiAdminGroup, MichaelDuignan | |
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