Center for Contract and Economic Organization
Program in the Law and Economics of Capital Markets
The law influences the behavior of its citizens in various ways. Well understood are the direct effects of legal rules. By imposing sanctions or granting subsidies, the law either expands or contracts the horizon of opportunities within which individuals can satisfy their preferences. In this way, society can give incentives for desirable behavior. In recent years, the social norms literature has shown that law can also have indirect effects on incentives. By empowering neighbors and other citizens to use public ridicule as an enforcement technique, these laws can influence behavior by imposing informal sanctions, such as shaming. Similarly, these laws can have self-sanctioning effects to the extent that citizens internalize the legal rule and are deterred by the prospect of guilt. These latter effects require that legal rules be mediated through social phenomena-social norms and human emotions-that are highly complex and only imperfectly understood. In the case of a shaming sanction, the law must rely on existing normative structures to influence in predictable ways the "expression" or social meaning of the disfavored (or favored) action. In the case of self-sanctions, the law must rely on the even more complex phenomenon of internalization of normative behavior. Legal scholars and economists continue to explore the internal mechanisms of social norms and of human emotions and to suggest predictive tools that may be capable of accounting for the influences of legal rules on social norms and individual values. In this essay, I ask the evaluative question: How far have we come? Clearly, as a descriptive matter, we have come a long way. But when it comes to using this more textured understanding of human experience to improve our ability to predict the effects of legal rules, the verdict is far less clear. The danger in such an environment is that the analyst will be guided more by the strength of her a priori beliefs in the relative efficacy of government intervention than in the analytical tools that are deployed. In short, the dilemma remains no different from when it was first identified by Arthur Leff a generation ago. Law and economics, Leff said, "is a desert," and law and society (read: sociology and psychology) "is a swamp." For twenty-five years legal scholars have searched for the holy grail, the fertile middle ground between economics and the other behavioral sciences. The search may be noble and important, but the end of the journey is not yet in sight. The Essay proceeds as follows. In Part I, I set out a contextual case study as an archetypal environment for analyzing the interactions of law and norms. Part II evaluates both the direct and indirect effects of law within this contextual framework using the techniques of rational choice theory. In Part III, I relax the assumption that preferences are exogenous in order to examine, in the same context, the explanatory power of the emerging expressive and internalization theories of law. I conclude, in Part IV, that a preference-shaping analysis provides a richer explanation for commonly observed interactions among legal rules, norms and values, but at a considerable price. The introduction of non-falsifiable hypotheses produces an analysis that is rich in content but also speculative and context-dependent.
Robert E. Scott,
The Limits of Behavioral Theories of Law and Social Norms,
Virginia Law Review (UVA Law School, Law-Economics RPS version)
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/1226