Sunstein, Jolls and Thaler (1998)

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1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare 2. Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)? 3. Harmony of interest assumption between authors and publishers (creators and producers/investors) 4. Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption) 5. Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right) B. Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction) C. Mass digitisation/orphan works (non-use; extended collective licensing) D. Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability) E. Fair remuneration (levies; copyright contracts) F. Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Source Details

Sunstein, Jolls and Thaler (1998)
Title: A behavioral approach to law and economics
Author(s): Sunstein, C. R., Jolls, C., Thaler, R. H.
Year: 1998
Citation: Sunstein, C. R., Jolls, C., & Thaler, R. H. (1998). A behavioral approach to law and economics. Stanford law review, 1471-1550.
Link(s): Definitive , Open Access
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About the Data
Data Description: The authors elaborate a behavioural economic model and apply it to certain fields of law.
Data Type: Primary and Secondary data
Secondary Data Sources:
Data Collection Methods:
Data Analysis Methods:
Industry(ies):
Country(ies):
Cross Country Study?: No
Comparative Study?: No
Literature review?: No
Government or policy study?: No
Time Period(s) of Collection:
  • Not stated
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Abstract

Economic analysis of law usually proceeds under the assumptions of neoclassical economics. But empirical evidence gives much reason to doubt these assumptions; people exhibit bounded rationality, bounded self-interest, and bounded willpower. This article offers a broad vision of how law and economics analysis may be improved by increased attention to insights about actual human behavior. It considers specific topics in the economic analysis of law and proposes new models and approaches for addressing these topics. The analysis of the article is organized into three categories: positive, prescriptive, and normative. Positive analysis of law concerns how agents behave in response to legal rules and how legal rules are shaped. Prescriptive analysis concerns what rules should be adopted to advance specified ends. Normative analysis attempts to assess more broadly the ends of the legal system: Should the system always respect people's choices? By drawing attention to cognitive and motivational problems of both citizens and government, behavioral law and economics offers answers distinct from those offered by the standard analysis.

Main Results of the Study

  • Traditional law and economics is largely based on the standard assumptions of neoclassical economics. These assumptions are sometimes useful but often false. People display bounded rationality: they suffer from certain biases, such as overoptimism and self-serving conceptions of fairness; they follow heuristics, such as availability, that lead to mistakes; and they behave in accordance with prospect theory rather than expected utility theory. People also have bounded willpower; they can be tempted and are sometimes myopic. They take steps to overcome this limitations. Finally, people are boundedly self-interested.* Even in a world without transactions costs and wealth effects, the assignment of property rights alters the allocation of resources, and that this may be particularly true for certain forms of property-rights assignment (such as court orders). These features of the world matter greatly for making predictions and formulating policy* People react differently to potential outcomes depending on whether they are perceived as foregone gains or out-of-pocket costs (losses), and that they are likely to think, mistakenly, that salient events are more common than equally prevalent but more subtle ones. These points bear on the supply of and the demand for law, and on the behavior of agents in their interactions with the legal system* Many laws which are seemingly inefficient and do not benefit powerful interest groups may be explained on grounds of judgments about right and wrong.* Cognitive difficulties and motivational distortions undermine or alter conventional economic prescriptions about the jury's role, most notably in the context of assessing negligence and making other factual determinations* A behavioural approach raises serious doubts about the reflexive antipaternalism of some of economic analysis of law. On the other hand, it raises equivalent questions about whether even well-motivated public officials will be able to offer appropriate responses to private mistakes and confusion.


Policy Implications as Stated By Author

  • The authors hope that in thirty years there will be no such thing as behavioral economics. Instead they hope that economists and economically oriented lawyers will simply incorporate the useful findings of other social sciences, and in so doing, transform economics into behavioral economics, and economic analysis of law into one of its most important branches* The assignment of property rights has pronounced effect on the final allocation goods. One has to take into account the endowment effect, which is a manifestation of the broader phenomenon of loss aversion”—the idea that losses are weighted more heavily than gains.



Coverage of Study

Coverage of Fundamental Issues
Issue Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)
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Coverage of Evidence Based Policies
Issue Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)
Green-tick.png

Datasets

Sample size: 1
Level of aggregation: Economic model
Period of material under study: Not stated