law, economics, behaviour, irrationality, regulation, government, self-interest
With the recent emergence of the behavioural approach to law and economics, there is now a systematic critique of law and economics which remains sympathetic to its overall objectives. Rather than seek to undermine traditional law and economics, the intent of the behavioural approach is generally to augment it, and render its formulations more representative of reality. Drawing upon experimental evidence and well-known examples of anomalies within economic theory, behavioural scholars claim that the law needs to better account for instances of individual irrationality. Having identified the situations when rational maximization does not hold, behavioural scholars are then able to propose ways to help individuals "get it right," or maximize properly. Unfortunately, the conservative ambitions of the behavioural scholars have not done justice to their source matenal. There is more to human endeavour, and the regulation of it, than varying degrees of correspondence to market rationality. Evidence reveals that individual values are independent of both the market and government, with the potential for fairness existing alongside self-interest in the thought patterns inherent to individuals. In using a prominent example from the behavioural catalogue, the ultimatum game, the author argues that rationality and irrationality do not occupy a binary relationship, as in either present or not present. but may instead be fluid within the same context. In the ultimatum game, self-interest is both dependent upon, and also secondary to, the availability of fairness considerations. To grasp this reality requires a theoretical framework more expansive than the maximization universe of law and economics, behavioural or otherwise.
Michael Ilg, "Imposing Self-Interest: Behavioural Law and Economics, the Ultimatum Game, and Value Possibilities" (2005) 28:1 Dal LJ 141.