Archive for the ‘Behavioral Law and Economics’ Category
The Pervasive Effect of Priors: Part Four
posted by Claire Hill
A New York Times front page last week prominently featured a story, U.S. Opens Spigot After Farmers Claim Discrimination, that shows many people in a very bad light indeed. A small, focused program intended to compensate a small number of people, true victims of discrimination in farm lending, has mushroomed for various reasons into a huge money pit, “compensating” those who may very well not have suffered discrimination.
Even those who generally think well of government would, I think, be hard pressed not to be distressed by this story. Government responded to political pressures to include more and more people, and require less and less documentation, resulting in a multi-billion dollar giveaway. I want to focus here on views of those taking “advantage” of the compensation scheme to seek compensation when they were not injured.
Different people have different views as to how people respond to incentives in general and monetary incentives in particular. Some think anyone would ‘do anything for a buck’ – including have children, get/not get married, get more healthcare, or file specious discrimination claims. Some people might think some subset of people (‘greedy’? ‘rational’? more on that later) would do anything for a buck. Some people might think that incentives matter ‘at the margin’ but that someone could not be persuaded to do something very much ‘against his nature.’
There’s also a role for self-deception here: a person who is motivated by a monetary incentive may not want to admit this, and therefore might convince herself that she was doing the incentivized act because it was right/what she really wanted to do, not because of the incentive. Which view a person has depends in part on how she sees herself: what does she see herself as being willing to do for money? It may also depend on her broader view as to whether ‘being willing to do many things for money’ is a bad thing or a good (“rational”) thing.
With respect to what motivates somebody else, a person may think ‘this person is like me—one of ‘us.’ ‘If she is doing x, her motivation is probably what mine would be.’ Obviously, people are not monolithic, and equally obviously, there will be enormous differences in the monetary opportunities people have and how they experience and react to them. There are many things nobody would do no matter how much money was being offered. Read the rest of this post »
April 29, 2013 at 11:41 am
Posted in: Behavioral Law and Economics
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The Pervasive Effect of Priors: Part Three
posted by Claire Hill
Last week’s marathon bombings got me thinking about how people form narratives about bad events, both big and small.
My partner Eric and I were traveling in Portugal in a rented car. The car only took diesel fuel, and we had difficulty figuring out whether particular pumps dispensed diesel. Eric tried to use one pump, which didn’t seem to fit. We asked an attendant, who seemed quite surly. He shoved the ill-fitting pump into the car. About 20 minutes later, on the highway, the car stopped working. The repair people who came to help us told us that the car had been filled with regular fuel.
Eric and I decided that the attendant had disliked us, perhaps because we were American, and had done this on purpose. My sister heard this story; her take was that surely the attendant just made a mistake. She asked ‘don’t you prefer to think of it that way’? Eric and I didn’t, but she did.
One suggestion that’s been made about the marathon bombings is that they could have been stopped given what the FBI knew or had reason to know about the elder brother. Is this comforting—or not? Do we prefer to think somebody knew enough, but didn’t act on their knowledge? Or would we prefer to think that it could not have been stopped? Read the rest of this post »
April 24, 2013 at 7:24 pm
Posted in: Behavioral Law and Economics
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The Pervasive Role of Priors: Part Two
posted by Claire Hill
Continuing the thread from my previous post, available here, on how prior beliefs and ways of viewing the world affect one’s conclusions:
One person who commented on my prior post noted that people have priors as to how much justification is needed for government action. I completely agree with this. I think that in many cases, that prior is importantly related to, and to some extent caused by, another prior, about what sort of people are in government.
I was brought up thinking that people who went into government were generally “good” – that they went into government to do what they thought of as the right thing, and that in many cases, what they thought was the right thing was pretty good. I recall watching the Alan Alda movie The Seduction of Joe Tynan, which I remember as being about a “good” politician completely compromising his principles to retain power, and feeling both sad and startled.
In a sense, my prior has stayed with me, even though I know of many-probably thousands at this point- examples to the contrary. I recall reading fairly recently (over at Marginal Revolution) about a government decision to keep the speeding limit on a stretch of highway too low. The low speed limit causes accidents, but yields lots of revenue from speeding tickets, presumably the motivation for keeping the limit as it is. My reaction was a bit of shock and dismay. Read the rest of this post »
April 4, 2013 at 6:46 am
Posted in: Behavioral Law and Economics
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The Pervasive Role of Priors: Part One
posted by Claire Hill
Thanks to Larry for inviting me to guest-blog. It’s every academic’s dream, I think, to have a built-in audience for her thoughts. And given the caliber of this blog and the readership it attracts, I could scarcely have a better one.
One subject I’ll be blogging on is my general view that people’s prior beliefs and other aspects of how they view and take in the world explain a huge amount, much more than is usually acknowledged. They (people’s priors) help explain why there are so many debates that never get anywhere. Both sides might have terrific arguments, yet nobody is persuaded.
And people keep on making the same sorts of arguments, even knowing this. Sometimes they wonder why more people aren’t persuaded. It’s a bit like the old joke about the person who goes to a foreign country and doesn’t know the language, so he tries to communicate in his own language and, when he’s not understood, he just tries again, repeating what he said . . . but louder.
I recently went to a very interesting colloquium co-sponsored by the Federalist Society and the Liberty Fund on Behavioral Law and Economics. One big issue discussed was the relationship between behavioral law and economics and law, including most importantly paternalistic justifications for law that behavioral l & e might provide. Michael Bloomberg’s attempt to ban sales of large sizes of soda was much on people’s minds.
One thing I very much wanted to get out of the discussion was an understanding of the other participants’ priors as well as my own. Here are some initial thoughts.
April 1, 2013 at 1:12 pm
Posted in: Behavioral Law and Economics
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The Disclosure Crisis
posted by Ryan Calo
Thank you to Danielle for the lovely (re)introduction and to Concurring Opinions for inviting me to blog this month.
The Washington Law Review hosted a symposium Thursday entitled “The Disclosure Crisis,” which covered everything from privacy policies to restaurant hygiene grades. The gist of the conference, on my view, was that the only thing piling up faster than examples of mandated disclosure as a regulatory strategy is the evidence it does not work. Time and time again, officials choose to intervene in a given area by requiring companies and others to reveal information so that individuals can protect themselves and police the market. And time and time again, disclosure ends up helping few if any consumers or citizens actually make better decisions.
March 2, 2013 at 6:43 pm
Posted in: Administrative Law, Articles and Books, Behavioral Law and Economics, Law Rev (Washington)
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Shoves, Nudges, and Freedom
posted by Frank Pasquale
Cass Sunstein reviews a book by Sarah Conly on coercive paternalism in the NYRB this month:
A natural objection [to paternalism] is that autonomy is an end in itself and not merely a means. On this view, people should be entitled to choose as they like, even if they end up choosing poorly. . . . Conly responds that when government makes (some) decisions for us, we gain not only in personal welfare but also in autonomy, if only because our time is freed up to deal with what most concerns us. . . .
Conly’s most controversial claim is that because the health risks of smoking are so serious, the government should ban it. She is aware that many people like to smoke, that a ban could create black markets, and that both of these points count against a ban. But she concludes that education, warnings, and other nudges are insufficiently effective, and that a flat prohibition is likely to be justified by careful consideration of both benefits and costs, including the costs to the public of treating lung cancer and other consequences of smoking.
As Big Beverage’s tactics come closer and closer to those of big tobacco, might it be the next target?
For those who’d like government to influence decisions in subtler ways, check out Kate Greenwood’s review of recent health care proposals from Richard Frank and Christopher Robertson. Very interesting ideas there.
February 18, 2013 at 9:37 pm
Posted in: Behavioral Law and Economics, Health Law
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BRIGHT IDEAS: Werbach and Hunter on For the Win: How Game Thinking Can Revolutionize Your Business
posted by Deven Desai
This Bright Ideas post looks at Kevin Werbach and Dan Hunter’s new book, For the Win: How Game Thinking Can Revolutionize Your Business. I have posted about it, but Kevin and Dan were gracious enough to answer some questions. We go into what is gamification, the differences between internal and external uses of the technique, how it relates to super-crunching, and the ethical and legal implications of the technique.
Kevin and Dan, you have drilled into an area, gamification, that seems almost arcane, a technique known to initiates. Why do it?
[KW] We actually think gamification is quite relevant for a broad range of audiences. First of all, video games have a huge impact on our culture. The games industry generates more revenue annually than Hollywood does at the box office. According to a Pew survey, 97% of American teeagers play video games, and it’s not just young people: the Entertainment Software Association reports that the average age of a gamer is 30, with almost half of them women. We can dismiss video games the way we used to dismiss social networking… and e-commerce before that… and the Internet before that… or we can look at why they are so powerful and apply those lessons in other contexts.
Second, the core goal of gamification is motivation. Think about all the situations where motivation matters: at work, at home, as consumers, in legal compliance, in social activism, and in collective action, to name a few. In all these cases, greater engagement drives material results. If there were motivational techniques that were proven in real-world businesses, consistent with decades of psychological research, and synergistic with big data and other leading-edge technology trends, wouldn’t you want to understand them?
And third, gamification is happening. It’s a rapidly growing business trend among startups, Fortune 500 companies, non-profits, and even government agencies. It raises a host of significant legal, operational, and ethical issues, as well as a variety of practical business concerns. We felt that my work on emerging technology and policy trends through the Supernova conference, and Dan’s scholarship on virtual worlds and background in cognitive psychology, gave us a unique ability to tackle these questions in a serious way. That’s why we put together the first gamification course at Wharton, and wrote For the Win as business guide to this emerging field.
OK, so what is gamification?
[KW] Gamification means applying design techniques from video games to business and other problems. In other words, it’s the process of motivating customers, employees, and communities by thinking like a game designer. It doesn’t mean turning everything into a game. Quite the contrary! Gamification involves incorporating elements of games into existing activities, the way Nike weaves levels and awards into its Nike+ system, or Microsoft motivated employees to review half a million Windows 7 dialogue boxes for localization errors with a competition among offices.
When you look at it that way, the basic concept of gamification is pretty simple, but doing it well is hard. Even experienced game designers often create games that aren’t much fun. Executing gamification effectively requires a combination of skills and knowledge, which we describe in For the Win.
Right. I see games are important in that they are big business and a big part of many folks’ lives. Let’s talk a little more about motivation. Is this approach a sort of applied behavioral economic one? Someone identifies levers and then builds systems to nudge or indeed shift the way others engage and behave?
November 15, 2012 at 9:30 pm
Posted in: Behavioral Law and Economics, Bright Ideas, Cyberlaw, Innovation, Technology, Web 2.0
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CELS VII: Low Variance, High Significance
posted by Dave Hoffman
[CELS VII, held November 9-10, 2012 at Stanford, was a smashing success due in no small part to the work of chief organizer Dan Ho, as well as Dawn Chutkow (of SELS and Cornell) and Stanford's organizing committee. For previous installments in the CELS recap series, see CELS III, IV, V, and VI. For those few readers of this post who are data-skeptics and don’t want to read a play-by-play, resistance is obviously futile and you might as well give up. I hear that TV execs were at CELS scouting for a statistic geek reality show, so think of this as a taste of what’s coming.]
Survey Research isn't just for the 1%!
Unlike last year, I got to the conference early and even went to a methods panel. Skipping the intimidating “Spatial Statistics and the GIS” and the ominous “Bureau of Justice Statistics” panels, I sat in on “Internet Surveys” with Douglas Rivers, of Stanford/Hoover and YouGuv. To give you a sense of the stakes, half of the people in the room regularly use mTurk to run cheap e-surveys. The other half regularly write nasty comments in JELS reviewer forms about using mTurk. (Oddly, I’m in both categories, which would’ve created a funny weighting problem if I were asked my views.) The panel was devoted to the proposition “Internet surveys are much, much more accurate than you thought, and if you don’t believe me, check out some algebraic proof. And the election.” Two contrasting data points. First, as Rivers pointed out, all survey subjects are volunteers, and thus it’s a bit tough to distinguish internet convenience samples from some oddball scooped up by Gallup’s 9% survey response rate. Second, and less comfortingly, 10-15% of the adult population has a reading disability that makes self-administration of a survey prompt online more than a bit dicey. I say: as long as the disability isn’t biasing with respect to contract psychology or cultural cognition, let’s survey on the cheap!
Lunch next. Good note for presenters: avoid small pieces of spinach/swiss chard if you are about to present. No one will tell you that you’ve spinach on a front tooth. Not even people who are otherwise willing to inform you that your slides are too brightly colored. Speaking of which, the next panel I attended was Civil Justice I. Christy and I presented Clusters are Amazing. We tag-teamed, with me taking 9 minutes to present 5 slides and her taking 9 minutes to present the remaining 16 or so. That was just as well: no one really wanted to know how our work might apply more broadly anyway. We got through it just fine, although I still can’t figure out an intuitive way to describe spectral clustering. What about “magic black box” isn’t working for you?
November 12, 2012 at 11:33 am
Posted in: Behavioral Law and Economics, Conferences, Contract Law & Beyond, Empirical Analysis of Law
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The Price of Bankruptcy
posted by Dave Hoffman
Credit Slips highlights a very cool new paper, Bankruptcy Spillovers: Distance, Public Disclosure, and Opaque Information. In the paper, Barry Scholnick examines bankruptcy filings in Canada at a micro level. Looking at the postal code of every filer – which code is a much more precise geographic identifier than our zip codes – Scholnick concludes:
“The punch line of my study is that there is indeed a significant impact from the past bankruptcies of neighbors (as defined by the very small Canadian Post Codes) to the probability that an individual in the neighborhood will file . . . I propose, and provide evidence for, the hypothesis that if a defaulter lives in a neighborhood with a large number of previous bankruptcies among the neighbors, then that individual will choose to default via bankruptcy rather than charge-off. This is because more neighborhood bankruptcies will lower stigma or provide more information about the process of bankruptcy.
On the other hand, I show that defaulters who live in low bankruptcy neighborhoods choose to default via charge-off rather than bankruptcy. This is consistent with the argument that low bankruptcy neighborhoods have higher levels of bankruptcy stigma, thus individual defaulters choose to default via charge-off in order to maintain more privacy about their default.”
This paper not only fits within a literature on bankruptcy, but also is a nice match to work by my co-author Tess Wilkinson-Ryan on how mortgage foreclosure and other forms of breach are socially mediated events. Abiding by onerous contracts is unpleasant, but we do it so long as it is socially validated. When it stops being socially normal to stick with terrible deals, we exit them.
October 1, 2012 at 7:15 pm
Posted in: Behavioral Law and Economics
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Volume 59, Issue 5 (June 2012)
posted by UCLA Law Review
Volume 59, Issue 5 (June 2012)
Articles
| Implicit Bias in the Courtroom | Jerry Kang et al. | 1124 |
| The Supreme Court’s Regulation of Civil Procedure: Lessons From Administrative Law | Lumen N. Mulligan & Glen Staszewski | 1188 |
Comments
| Techniques for Mitigating Cognitive Biases in Fingerprint Identification | Elizabeth J. Reese | 1252 |
| Credit CARD Act II: Expanding Credit Card Reform by Targeting Behavioral Biases | Jonathan Slowik | 1292 |
| Shocking the Conscience: What Police Tasers and Weapon Technology Reveal About Excessive Force Law | Aaron Sussman | 1342 |
July 1, 2012 at 2:39 pm
Posted in: Administrative Law, Behavioral Law and Economics, Civil Procedure, Constitutional Law, Consumer Protection Law, Courts, Evidence Law, Law Rev (UCLA)
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Stanford Law Review, 64.5 (2012)
posted by Stanford Law Review
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Volume 64 • Issue 5 • May 2012 |
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Articles Securities Class Actions Against Foreign Issuers How Much Should Judges Be Paid? Note |
June 19, 2012 at 1:37 am
Posted in: Administrative Law, Anonymity, Behavioral Law and Economics, Civil Rights, Courts, Disability Law, Economic Analysis of Law, Employment Law, Financial Institutions, Law Rev (Stanford), Law Rev Contents
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Stanford Law Review, 64.4 (2012)
posted by Stanford Law Review
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Volume 64 • Issue 4 • April 2012 |
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Articles “They Saw a Protest”: Constitutional Design in the Ancient World The Copyright-Innovation Tradeoff: Notes Derivatives Clearinghouses and Systemic Risk: |
May 23, 2012 at 8:35 pm
Posted in: Behavioral Law and Economics, Constitutional Law, Corporate Finance, Courts, Economic Analysis of Law, Financial Institutions, First Amendment, Innovation, Intellectual Property, Law Rev (Stanford), Law Rev Contents
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Measurable Things
posted by Dave Hoffman
The Misleadingly Convenient Source of Information
A common criticism one reads of ELS is that “too much of the work is driven by the existence of a data set, rather than an intellectual or analytical point.” It’s ironic that this is the very critique that the realists made of traditional legal scholarship. Consider the great Llewellyn:
“I am a prey, as is every man who tries to work with law, to the apperceptive mass. I see best what I have learned to see. I am a prey, too — as are the others — to the old truth that the available limits vision, the available bulks as if it were the whole. What records have I of the work of magistrates? How shall I get them? Are there any? And if there are, must I search them out myself? But the appellate courts make access to their work convenient. They issue reports, printed, bound, to be had all gathered for me in the libraries. The convenient source of information lures. Men work with it, first, because it is there; and because they have worked with it, men build it into ideology. The ideology grows and spreads and gains acceptance, acquires a force and an existence of its own, becomes a thing to conjure with: the rules and concepts of the courts of last resort.”
Or to put it differently, all of our work – quantitative empiricists, doctrinalists, corporate finance wizards, administrative regulation parsers, legal philosophers, and derivative social psychologists alike – is driven by the materials at hand. For most lawyers and legal academics, appellate opinions are the most convenient pieces of information available; we use such opinions to create mental models of what the “law” is, and (ordinarily in legal scholarship) what it ought be. Indeed, whenever trial court opinions are cited, they are often discounted as aberrant or transitory, in part because they are known to be unrepresentative!
Why, you might wonder, is the convention of data-driven-scholarship a particular problem in quantitative empirical work? ELS’s detractors make three interrelated claims:
February 26, 2012 at 1:10 pm
Posted in: Behavioral Law and Economics, Empirical Analysis of Law
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Some Truly Fascinating Numbers on Video Game Economics
posted by Deven Desai
Back in October, Valve co-founder Gabe Newell explained the economics of video games as his company sees it. The Geekwire article is worth the read. For now, I’ll point out that he admits “We don’t understand what’s going on” and uses the language of co-creation of value, which I happen to believe is the current future as it were, to describe what the company is doing:
This is probably the biggest change that’s affected the gaming business over the last few years. It’s not just that we have digital distribution to our customers. It’s that we have this incredible two-way connection that we’ve never had before with our customers.
We’ve gone from a situation where we dream up a game, we spend three years making it, we put it in a box, we put it out in stores, we hope it sells, to a situation that’s incredibly more fluid and dynamic, where we’re constantly modifying the game with the participation of the customers themselves
The comments on piracy comport with insights from other industries:
One thing that we have learned is that piracy is not a pricing issue. It’s a service issue. The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates. For example, Russia. You say, oh, we’re going to enter Russia, people say, you’re doomed, they’ll pirate everything in Russia. Russia now outside of Germany is our largest continental European market. … the people who are telling you that Russians pirate everything are the people who wait six months to localize their product into Russia. … So that, as far as we’re concerned, is asked and answered. It doesn’t take much in terms of providing a better service to make pirates a non-issue.
The information on pricing is really cool. “[W]e varied the price of one of our products. We have Steam so we can watch user behavior in real time. That gives us a useful tool for making experiments which you can’t really do through a lot of other distribution mechanisms. What we saw was that pricing was perfectly elastic. In other words, our gross revenue would remain constant. We thought, hooray, we understand this really well. There’s no way to use price to increase or decrease the size of your business.”
Yet he goes on to describe how sales such as a 75% price reduction lead to a “gross revenue increased by a factor of 40.” They tested against a product they did not own and saw similar results. Then they tested free. It turns out free to play and and free work differently. His thought is that the user base matters because they value the products differently including “what the statement that something is free to play implies about the future value of the experience that they’re going to have.”
Furthermore, conversion rates shift too. Free to play often “see[s] about a 2 to 3 percent conversion rate of the people in their audience who actually buy something, and then with Team Fortress 2, which looks more like Arkham Asylum in terms of the user profile and the content, we see about a 20 to 30 percent conversion rate of people who are playing those games who buy something.”
What do all these tests mean? As Newell said, it’s unclear. That is why I could see some rather cool studies being done for this emerging area.
December 26, 2011 at 6:31 pm
Posted in: Behavioral Law and Economics, Economic Analysis of Law, Intellectual Property, Technology
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Nest Thermostat, Data Driven for Your Pleasure and Green Health
posted by Deven Desai
As Deano and others might say Baby, It’s Cold Outside. And, heating costs are no joke. Neither is about $250 for a thermostat. Nonetheless, data and networks are changing the way we manage heating. As Wired reports, Tony Faddell, founder of Nest Labs makes this compelling point:
Untold tons of carbon were being pumped into the air, with people losing billions of dollars in energy costs, all because there was no easy, automatic way to control the temperature. But what if you could apply all the skills and brilliance of Silicon Valley to produce a thermostat that was smart, thrifty and so delightful that saving energy was as much fun as shuffling an iTunes playlist?
So far, you may be thinking that programmable thermostats are old hat. They are and may not have worked as well as hoped given that the Times reports “Two years ago, the federal government eliminated the entire programmable thermostat category from its Energy Star program.” Yet, there is something different here. Improved, networked climate control is not your father’s Oldsmobile. It sounds crazy, but the pre-orders sold out and demand is high. Others are in the game as well. Some require more tech savvy to install. Regardless the idea is that data and networks will allow one to manage energy costs well.
The Nest seems to be the leader for easy use and install. The Times explains that the design is great but then the iPod designer would have to do that, right? The best part for me is that the Nest uses Wi-Fi which means software updates, programming from the Web or an App, and it learns.
Learns? Yes, learns. The system tells users how much time it will take to raise a house’s temperature (which stops the habit of cranking heat to get to a lower temperature), notes manual adjustments for home, midday, away, etc. to start to offer an automatic cycle attuned to habits. Motion sensors help set basic overrides for heating and cooling to take care times when no one is home. In a nod to behaviorial economics and some things that I think Ryan Calo has been considering, the Times explains that “Nest says that turning down your thermostat by even a single degree can save you 5 percent in energy. To that end, it offers a little motivational logo: a green leaf. It glows brighter as you turn the ring beyond your standard comfort zone. As a positive-reinforcement technique, it’s a lot more effective than an exhortation from Jimmy Carter to put on a sweater.”
I always feel a little sad when reminded of President Carter’s attempt to address the energy crisis of the 1970s. It seems to flow from a view of WWII America when people buckled down for the greater good, but that had perhaps faded years before his plea. Still, if we have learned that other approaches can aid better judgment and action, maybe we will turn those thermostats to 68 and wear that sweater as the then President asked us to do.
December 23, 2011 at 4:25 pm
Posted in: Behavioral Law and Economics, Technology
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Paying People Not To Use Talk To Their Cellphones’ Virtual Assistants in Public
posted by Dave Hoffman
The NYT isn’t entirely worthless. There’s a cute technology piece up on how irritated the reporter and his friends-on-the-street are by people who talk to their iPhone’s Siri when they could just as easily text. As the Times puts it, this is a problem of unfelt externalities:
“James E. Katz, director of the Center for Mobile Communication Studies at Rutgers, said people who use their voices to control their phones are creating an inconvenience for others — noise — rather than coping with an inconvenience for themselves — the discomfort of having to type slowly on a cramped cellphone keyboard. Mr. Katz compared the behavior with that of someone who leaves a car’s engine running while parked, creating noise and fumes for people surrounding them.”
The piece goes onto claim that eventually, we’re get used to this noise pollution. Perhaps we will! But if we don’t, there are options other than anti-nuisance regulation. After all, there are competing rights here: the right to speak so you don’t have to confront your inability to text without typos and the right not to hear what the person next to you on the subway wants for dinner. Now, we could ban Siri-like Apps in public places. But, as all good Coasians know, there’s another option. We could decide that the Siri-ans should have the right to speak wherever they are: irritated hearers can simply pay the offending speaker not to talk into their iPhone in public. In fact, I wonder if Apple could perhaps make an App for that. Call it the “Shut Down Nearby Siris For Five Minutes Auction App.” People could list the price at which they’d agree to be paid to be silenced; irritated listeners could either pay that price or bid at a lower rate. If hearers and speakers matched, we’d achieve (in the Article’s words) the socially efficient outcome: back to the “old days when people just texted in public.”
December 3, 2011 at 1:08 am
Posted in: Behavioral Law and Economics, Economic Analysis of Law
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CELS VI: Half a CELS is Statistically Better Than No CELS
posted by Dave Hoffman
Northwestern's Stained Glass Windows Made Me Wonder Whether Some Kind of Regression Was Being Proposed
As promised, I’m filing a report from the Sixth Annual Empirical Studies Conference, held 11/4-11/5 at Northwestern Law School. Several of the attendees at the Conference approached me and remarked on my posts from CELS V, IV, and III. That added pressure, coupled with missing half of the conference due to an unavoidable conflict, has delayed this post substantially. Apologies! Next time, I promise to attend from the opening ceremonies until they burn the natural law figure in effigy. Next year’s conference is at Stanford. I’ll make a similar offer to the one I’ve made in the past: if the organizing committee pays my way, I promise not only to blog the whole thing, but to praise you unstintingly. Here’s an example: I didn’t observe a single technical or organization snafu at Northwestern this year. Kudos to the organizing committee: Bernie Black, Shari Diamond, and Emerson Tiller.
What I saw
I arrived Friday night in time for the poster session. A few impressions. Yun-chien Chang’s Tenancy in ‘Anticommons’? A Theoretical and Empirical Analysis of Co-Ownership won “best poster,” but I was drawn to David Lovis-McMahon & N.J. Schweitzer’s Substantive Justice: How the Substantive Law Shapes Perceived Fairness. Overall, the trend toward professionalization in poster display continues unabated. Even Ted Eisenberg’s poster was glossy & evidenced some post-production work — Ted’s posters at past sessions were, famously, not as civilized. Gone are the days where you could throw some powerpoint slides onto a board and talk about them over a glass of wine! That said, I’m skeptical about poster sessions generally. I would love to hear differently from folks who were there.
On Saturday, bright eyed and caffeinated, I went to a Juries panel, where I got to see three pretty cool papers. The first, by Mercer/Kadous, was about how juries are likely to react to precise/imprecise legal standards. (For a previous version, see here.) Though the work was nominally about auditing standards, it seemed generalizable to other kinds of legal rules. The basic conclusion was that imprecise standards increase the likelihood of plaintiff verdicts, but only when the underlying conduct is conservative but deviates from industry norms. By contrast, if the underlying conduct is aggressive, jurors return fewer pro-plaintiff verdicts. Unlike most such projects, the authors permitted a large number of mock juries to deliberate, which added a degree of external validity. Similarly worth reading was Lee/Waters’ work on jury verdict reporters (bottom line: reporters aren’t systematically pro-plaintiff, as the CW suggests, but they are awfully noise measures of what juries are actually doing). Finally, Hans/Reyna presented some very interesting work on the “gist” model of jury decisionmaking.
At 11:00, I had to skip a great paper by Daniel Klerman whose title was worth the price of admission alone – the Selection of Thirteenth-Century Disputes for Litigation. Instead, I went to Law and Psychology III. There, Kenworthey Bilz presented Crime, Tort, Anger, and Insult, a paper which studies how attribution & perceptions of dignitary loss mark a psychological boundary between crime and tort cases. Bilz presented several neat experiments in service of her thesis, among them a priming survey- – people primed to think about crimes complete the word “ins-” as “insult,” while people primed to think about torts complete it as “insurance.” (I think I’ve got that right – - the paper isn’t available online, and I’m drawing on two week old memories.)
At noon, Andrew Gelman gave a fantastic presentation on the visualization of empirical data. The bottom line: wordles are silly and convey no important information. Actually, Andrew didn’t say that. I just thought that coming in. What Andrew said was something more like “can’t people who produce visually interesting graphs and people who produce graphs that convey information get along?”
Finally, I was the discussant at an Experimental Panel, responding to Brooks/Stremitzer/Tontrup’s Framing Contracts:Why Loss Framing Increases Effort. Attendees witnessed my ill-fated attempt to reverse the order of my presentation on the fly, leading me to neglect the bread in the praise sandwich. This was a good teaching moment about academic norms. My substantive reaction to Framing Contracts is that it was hard to know how much the paper connected to real-world contracting behavior, since the kinds of decision tasks that the experimental subjects were asked to perform were stripped of the relational & reciprocal norms that characterize actual deals.
CELS: What I missed
The entire first day! One of my papers with the cultural cognition project, They Saw a Protest, apparently came off well. Of course, there was also tons of great stuff not written from within the expanding cultural cognition empire. Here’s a selection: on lawyer optimism; on public housing, enforcement and race; on probable cause and hindsight judging; and several papers on Iqbal, none of which appear to be online.
What did you see & like?
November 15, 2011 at 3:26 pm
Posted in: Advertising, Behavioral Law and Economics, Conferences, Empirical Analysis of Law
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An Irrational Undertaking: Why Aren’t We More Rational?
posted by Amanda Pustilnik
By unanimous reader demand – all one out of one readers voting, as of last week – this post will explore the small topic of the biological basis of “irrationality,” and its implications for law. Specifically, Ben Daniels of Collective Conscious asked the fascinating question: “What neuro-mechanisms enforce irrational behavior in a rational animal?”
Ben’s question suggests that ostensibly rational human beings often act in irrational ways. To prove his point, I’m actually going to address his enormous question within a blog post. I hope you judge the effort valiant, if not complete.
The post will offer two perspectives on whether, as the question asks, we could be more rational than we are if certain “neuro-mechanisms” did not function to impair rationality. The first view is that greater rationality might be possible – but might not confer greater benefits. I call this the “anti-Vulcan hypothesis”: While our affective capacities might suppress some of our computational power, they are precisely what make us both less than perfectly rational and gloriously human – Captain Kirk, rather than Mr. Spock. A second, related perspective offered by the field of cultural cognition suggests that developmentally-acquired, neurally-ingrained cultural schemas cause people to evaluate new information not abstractly on its merits but in ways that conform to the norms of their social group. In what I call the “sheep hypothesis,” cultural cognition theory suggests that our rational faculties often serve merely to rationalize facts in ways that fit our group-typical biases. Yet, whether we are Kirk or Flossie, the implication for law may be the same: Understanding how affect and rationality interact can allow legal decision-makers to modify legal institutions to favor the relevant ability, modify legal regimes to account for predictable limitations on rationality, and communicate in ways that privilege social affiliations and affective cues as much as factual information.
First, a slight cavil with the question: The question suggests that people are “rational animal[s]” but that certain neurological mechanisms suppress rationality – as if our powerful rational engines were somehow constrained by neural cruise-control. Latent in that question are a factual assumption about how the brain works (more on that later) and a normative inclination to see irrationality as a problem to which rationality is the solution. Yet, much recent work on the central role of affect in decision-making suggests that, often, the converse may be true. (Among many others, see Jonathan Haidt and Josh Greene; these links will open PDF articles in a new window.) Rationality divorced from affect arguably may not even be possible for humans, much less desirable. Indeed, the whole idea of “pure reason” as either a fact or a goal is taking a beating at the hands of researchers in behavioral economics, cognitive neuroscience, and experimental philosophy – and perhaps other fields as well.
Also, since “rational” can mean a lot of things, I’m going to define it as the ability to calculate which behavior under particular circumstances will yield the greatest short-term utility to the actor. By this measure, people do irrational things all the time: we discount the future unduly, preferring a dollar today to ten dollars next month; we comically misjudge risk, shying away from the safest form of transportation (flying) in favor of the most dangerous (driving); we punish excessively; and the list goes on.
Despite these persistent and universal defects in rationality, experimental data indicates that our brains have the capacity to be more rational than our behaviors would suggest. Apparently, certain strong affective responses interfere with activity in particular regions of the prefrontal cortex (pfc); these areas of the pfc are associated with rationality tasks like sequencing, comparing, and computing. Experiments in which researchers use powerful magnets to temporarily “knock out” activity in limbic (affective) brain regions, the otherwise typical subjects displayed savant-like abilities in spatial, visual, and computational skills. This experimental result mimics what anecdotally has been reported in people who display savant abilities following brain injury or disease, and in people with autism spectrum disorders, who may have severe social and affective impairments yet also be savants.
So: Some evidence suggests the human brain may have massively more computing power than we can to put to use because of general (and sometimes acute) affective interference. It may be that social and emotional processing suck up all the bandwidth; or, prosocial faculties may suppress activity in computational regions. Further, the rational cognition we can access can be totally swamped out by sudden and strong affect. With a nod to Martha Nussbaum, we might call this the “fragility of rationality.”
This fragility may be more boon than bane: Rationality may be fragile because, in many situations, leading with affect might confer a survival advantage. Simple heuristics and “gut” feelings, which are “fast and cheap,” let us respond quickly to complex and potentially dangerous situations. Another evolutionary argument is that all-important social relationships can be disrupted by rational utility-maximizing behaviors – whether you call them free-riders or defectors. To prevent humans from mucking up the enormous survival-enhancing benefits of community, selection would favor prosocial neuroendocrine mechanisms that suppress or an individual’s desire to maximize short-term utility. What’s appealing about this argument is that – if true – it means that that which enables us to be human is precisely that which makes us not purely rational. This “anti-Vulcan” hypothesis is very much the thrust of the work by Antonio Damasio (and here), Dan Ariely, and Paul Zak, among many other notable scholars.
An arguably darker view of the relationship between prosociality and rationality comes from cultural cognition theory. While evolutionary psychology and behavioral economics suggest that people have cognitive quirks as to certain kinds of mental tasks, cultural cognition suggests that people’s major beliefs about the state of the world – the issues that self-governance and democracy depend upon – are largely impervious to rationality. In place of rationality, people quite unconsciously “conform their beliefs about disputed matters of fact … to values that define their cultural identities.”
On this view, people aren’t just bad at understanding risk and temporal discounting, among other things, because our prosocial adaptations suppress it. Rather, from global warming to gun control, people unconsciously align their assessments of issues to conform to the beliefs and values of their social group. Rationality operates, if at all, post hoc: It allows people to construct rationalizations for relatively fact-independent but socially conforming conclusions. (Note that different cultural groups assign different values to rational forms of thought and inquiry. In a group that highly prizes those activities, pursuing rationally-informed questioning might itself be culturally conforming. Children of academics and knowledge-workers: I’m looking at you.)
This reflexive conformity is not a deliberate choice; it’s quite automatic, feels wholly natural, and is resilient against narrowly rational challenges based in facts and data. And that this cognitive mode inheres in us makes a certain kind of sense: Most people face far greater immediate danger from defying their social group than from global warming or gun control policy. The person who strongly or regularly conflicts with their group becomes a sort of socially stateless person, the exiled persona non grata.
To descend from Olympus to the village: What could this mean for law? Whether we take the heuristics and biases approach emerging from behavioral economics and evolutionary psychology or the cultural cognition approach emerging from that field, the social and emotional nature of situated cognition cannot be ignored. I’ll briefly highlight two strategies for “rationalizing” aspects of the legal system to account for our affectively-influenced rationality – one addressing the design of legal institutions and the other addressing how legal and political decisions are communicated to the public.
Oliver Goodenough suggests that research on rational-affective mutual interference should inform how legal institutions are designed. Legal institutions may be anywhere on a continuum from physical to metaphorical, from court buildings to court systems, to the structure and concept of the jury, to professional norms and conventions. The structures of legal institutions influence how people within them engage in decision-making; certain institutional features may prompt people bring to bear their more emotive (empathic), social-cognitive (“sheep”), or purely rational (“Vulcan”) capacities.
Goodenough does not claim that more rationality is always better; in some legal contexts, we might collectively value affect – empathy, mercy. In another, we might value cultural cognition – as when, for example, a jury in a criminal case must determine whether a defendant’s response to alleged provocation falls within the norms of the community. And in still other contexts, we might value narrow rationality above all. Understanding the triggers for our various cognitive modes could help address long-standing legal dilemmas. Jon Hanson’s work on the highly situated and situational nature of decision-making suggests that the physical and social contexts in which deliberation takes place may be crucial to the answers at which we arrive.
Cultural cognition may offer strategies for communicating with the public about important issues. The core insight of cultural cognition is that people react to new information not primarily by assessing it in the abstract, on its merits, but by intuiting their community’s likely reaction and conforming to it. If the primary question a person asks herself is, “What would my community think of this thing?” instead of “What is this thing?”, then very different communication strategies follow: Facts and information about the thing itself only become meaningful when embedded in information about the thing’s relevance to peoples’ communities. The cultural cognition project has developed specific recommendations for communication around lawmaking involving gun rights, the death penalty, climate change, and other ostensibly fact-bound but intensely polarizing topics.
To wrap this up by going back to the question: Ben, short of putting every person into a TMS machine that makes us faux-savants by knocking out affective and social functions, we are not going to unleash our latent (narrowly) rational powers. But it’s worth recalling that the historical, and now unpalatable term, for natural savants used to be “idiot-savant”: This phrase itself suggests that, without robust affective and social intelligence – which may make us “irrational” – we’re not very smart at all.
October 16, 2011 at 2:25 am
Tags: cultural cognition, emotion & cognition, irrationality, law & neuroscience, rationality
Posted in: Behavioral Law and Economics, Law and Psychology, Legal Theory, Philosophy of Social Science, Uncategorized
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Blame Email Disclaimers on Judge Harmon?
posted by Dave Hoffman
The Economist has a fun blurb on email disclaimers — the ones that boldly state that the email you’ve just received creates no legal relationship, offers no advice, and generally isn’t worth the paper it isn’t printed on. The blurb argues that such disclaimers are “are mostly, legally speaking, pointless. Lawyers and experts on internet policy say no court case has ever turned on the presence or absence of such an automatic e-mail footer in America, the most litigious of rich countries.” Why, then, do they exist? Because lawyers are lemmings, and “once something has become a legal habit it has a tendency to stick.” Also, of course, the marginal cost to each sender of adding a pointless disclaimer is basically zero.
But inefficient social movements presumably need some kind of push to get off the ground, even if they fly off a cliff. I hypothesize that Judge Harmon’s highly publicized secondary actors decision in the Enron litigation from 2002 provided the launching pad. In that decision, as you may recall, Judge Harmon said that law firms (and accountants, and consultants) could be exposed to securities liability as a primary violator of 10b-5 if they, with requisite scienter, created a document that (when routed to the public) turned to be misleading. I remember being in practice after that decision came out, and the firm was quite concerned to create disclaimers for all documents that went out the door to try to react to the decision’s potential scope. Indeed, we know that one result of the decision (and others like it) was to push firms to move from general to limited partnership models. So perhaps it also influenced email practices.
How about it? For those of you in practice in the mid-1990s, can you reach into your archives and check for email disclaimers? If not, we’ll call my theory a winner. If so, we need to find some new explanation. [AJ Sutter, I'm talking to you.]
May 16, 2011 at 10:52 am
Posted in: Behavioral Law and Economics, Law Practice
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Grandma Got Run Over By a Voucher
posted by Frank Pasquale
The “sensible liberaltarian” blogosphere is debating the wisdom of turning Medicare into direct cash payments to seniors. I guess everyone’s forgotten about the bargaining power of a public option like Medicare vis a vis increasingly concentrated providers. And hey, why bother with the boring big picture of health industry trends when you can spin out thought experiments about brave individuals risking cancer nontreatment by buying cheap insurance? Somehow the hypotheticals never specify whether those who “prefer” cheap insurance do so to buy a few more rounds of golf at the country club, or to find a dinner more satisfying than catfood.
Kudos to Ezra Klein for explaining some kinks in the voucher concept:
Let’s run through the cash-grant world: At age 65, grandma decides to purchase no health-care plan, as she figures she’ll just get one when she gets sick, or maybe just get one next year, or perhaps she just doesn’t want to spend money extending decrepitude. But then she has a stroke and gets rushed to the hospital. Someone is paying for that emergency care. It might be the hospital. It might be the taxpayers. But it’s someone: The paramedics aren’t going to refuse to lift her onto the gurney. And then she needs rehabilitation. Someone is going to end up paying for that, too. Or perhaps she gets leukemia and, in a display of consistency, doesn’t want heroic efforts made to fight it. But are we really prepared to deny her pain meds? Or hospice?
April 15, 2011 at 12:05 pm
Posted in: Behavioral Law and Economics, Health Law
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