Law & Economics Working Papers
Human beings are often boundedly rational. In the face of bounded rationality, the legal system might attempt either to "debias law," by insulating legal outcomes from the effects of boundedly rational behavior, or instead to "debias through law," by steering legal actors in more rational directions. Legal analysts have focused most heavily on insulating outcomes from the effects of bounded rationality. In fact, however, a large number of actual and imaginable legal strategies are efforts to engage in debiasing through law – to help people reduce or even eliminate boundedly rational behavior. In important contexts, these efforts promise to 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 both a general description of debiasing through law and an account of how such debiasing does or could work to address central legal questions across a range of areas, from consumer safety law to corporate law to property law. Discussion is also devoted to the risk of government manipulation that is sometimes created when debiasing through law is employed.
Cass R. Sunstein & Christine Jolls, "Debiasing through Law" (John M. Olin Program in Law and Economics Working Paper No. 225, 2004).