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Debiasing through Law

Christine Jolls and Cass Sunstein

No 11738, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In many settings, human beings are boundedly rational. A distinctive and insufficiently explored legal response to bounded rationality is to attempt to "debias through law," by steering people in more rational directions. In many important domains, existing legal analyses emphasize the alternative approach of insulating outcomes from the effects of boundedly rational behavior, often through blocking private choices. In fact, however, a large number of actual and imaginable legal strategies are efforts to engage in the very different approach of debiasing through law by reducing or even eliminating people's boundedly rational behavior. In important contexts, these efforts to debias through law can avoid the costs and inefficiencies associated with regulatory approaches that take bounded rationality as a given and respond by attempting to insulate outcomes from its effects. This paper offers a general account of how debiasing through law does or could work to address legal questions across a range of areas, from consumer safety law to corporate law to property law. Discussion is also devoted to the risks of government manipulation and overshooting that are sometimes raised when debiasing through law is employed.

JEL-codes: K00 K11 K13 K22 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-law and nep-reg
Note: LE
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Published as Jolls, Christine and Cass R. Sunstein. "Debiasing Through Law." Journal of Legal Studies 35 (2006): 199-241.

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