Putting behavioural economics in its place: the new realism of law, economics and psychology and its alternatives

Abstract

The behavioural turn in economics has spilled over into the field of law and economics. Some scholars even consider behavioural economics a variety of new legal realism, invoking earlier efforts to promote law as a behavioural and social science. In fact, behavioural economics works towards more realistic assumptions about human behaviour by drawing on empirical research methods, namely economic experiments. However, not all realisms are alike. Much of the mainstream of behavioural economics is inspired by cognitive psychology, which entails a move from behaviour to cognition and, ultimately, to brains. For scholars with a socio-legal background, legal realism rather points in the opposite direction: to the social contexts and institutional frameworks that shape individual behaviour. By exploring alternative options for a new realism at the intersection of law, economics, and related disciplines, this article exposes the relative neglect of institutions in behavioural economics and the tendency to reduce them to a corrective for cognitive biases in applications to law. At the same time, it provides a broad overview of different varieties of realism next to behavioural-economic ones.