Professor Kathryn Zeiler’s New Book Provides Overview on Behavioral Law and Economics
Zeiler and her coeditor offer a window into how behavioral economics is being applied to areas such as consumer finance, torts, and the happiness of lawyers.
Professor Kathryn Zeiler’s Research Handbook on Behavioral Law and Economics, published in March 2018, seeks to provide a window into how behavioral economics is being applied to a range of legal areas from consumer finance and torts to the happiness of lawyers. “The goal of the Research Handbook series is to hit the pause button and ask where we are in the research, so each chapter tackles a specific area, summarizing the literature, what we know to be true, and what questions remain open,” says Zeiler, who coedited the book with Professor Joshua C. Teitelbaum of Georgetown University’s Law Center.
Behavioral economics is a cross-disciplinary subfield of economics that taps into lessons from psychology to improve economic models and predictions. It focuses on how humans make decisions, acknowledging their limitations when it comes to things like willpower, making instant calculations, and rationality. Behavioral law and economics is the application of behavioral economic models to legal topics.
In addition to coediting the book, Zeiler wrote a chapter focused on one of her research areas, reluctance of people to trade. “Since the 1970s, researchers have been studying people’s reluctance to trade endowed items—they tend to want to hang on to endowments, casting doubt on standard economic theories that do not predict such reluctance,” she says. Her chapter catalogs theories designed to explain reluctance to trade and the vast body of experimental studies that test them. These theories have wide application in law, from rules on adverse possession and negotiation strategy to affirmative action doctrine, a subject of Zeiler’s previous research.
“I reviewed over 150 studies for this chapter to summarize what we know and what we don’t know. Researchers often don’t get an opportunity to read literally everything in a field, so this was an exciting project for me,” says Zeiler. “The chapter demonstrates that multiple theories are able to organize large swaths of data from experiments on reluctance to trade and that the literature has produced more questions than answers. My hope is that the chapter will assist legal scholars who import behavioral economics into law to get a handle on the big picture.”
She points to a chapter on pawnshop and payday loans as another example of the importance of seeing the whole picture. These forms of credit provide cash to high-risk borrowers in exchange for very high interest rates, which can lead to a cycle of debt. “Some researchers attribute this debt cycle to borrowers’ limited ability to understand the implications of these loans or willpower issues, and they argue for regulations to protect borrowers from themselves. Yet others argue that people who take these loans might have rational reasons to do so, such as avoiding homelessness. By gathering data and using sophisticated methods to test various theories, behavioral economics research on legal topics helps us determine optimal forms of regulation.”
As for the happiness chapter, she notes that behavioral economists brought the notion of happiness to economics, and their findings can be applied to legal policy, ethics, negotiations and even legal education and practice. “My coeditor and I wanted to gather together a set of leading researchers in behavioral law and economics to provide a snapshot of what we think are the most interesting areas, and work on happiness fits the bill,” says Zeiler, who teaches Tort Law, Health Law, Economic Analysis of Health Care Law, and a Law and Economics Seminar.
She explains that the book was written with three audiences in mind. The first group is people who want to learn the basics about this field. The second group is legal scholars, who may not have time to read every study on a specific topic and are looking for good summaries. The third group is economists interested in legal questions and in identifying open research questions, so they can use the tools of economics to push legal theory forward.
“This type of handbook is valuable because it allows us to take a step back and note where we are with the research and to identify possible avenues for continued investigation. We need more of this type of synthesis. It also is extremely helpful to legal scholars looking to import behavioral economics into law in useful ways,” adds Zeiler.
Reported by Meghan Laska
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