Law and behavioral science: Removing the rationality assumption from law and economics

As law and economics turns forty years old, its continued vitality is threatened by its unrealistic core behavioral assumption: that people subject to the law act rationally. Professors Korobkin and Ulen argue that law and economics art reinvigorate itself by replacing the rationality assumption with a more nuanced understanding of human behavior that draws on cognitive psychology, sociology, and other behavioral sciences, thus creating a new, scholarly paradigm called "law, and behavioural science." This article provides an early blueprint for research in this paradigm. The authors first explain the various ways the rationality assumption is used in legal scholarship and why it leads to unsatisfying policy prescriptions. They then systematically examine the empirical evidence inconsistent with the rationality assumption and, drawing on a wide range of substantive areas of law, explain how normative policy conclusions of law and economics will change and improve under the law-and-behavioral-science approach.