A behavioural approach to Law and Economics: An analysis of the legal process and judicial decision making

Although law and economics were confined exclusively to their traditional fields of action for decades, in the 1960s and 1970s their relationship became increasingly significant, resulting in a proper discipline, Law and Economics. It deals with the analysis of legal issues from an economic point of view. This approach is incredibly innovative and allows the law to be taken to a higher level of efficiency and practical effectiveness. This is because, for the first time, the law can rely on proper behavioural theories to predict social response to rules and sanctions, rather than base just on common sense. Several theories aim to predict human behaviour in different circumstances, from Expected Value and Expected Utility theories to Prospect theory and game theory and so on. The objective of this work is to analyse the legal process from the broader perspective of Law and Economics, taking advantage of the application of an interdisciplinary approach. Also, thanks to psychological contributions, the litigation process and the decision-making of the actors involved – litigants, lawyers, judges and juries – have been investigated. What has been evidenced is the impossibility of a wholly rational and errorless process in the legal arena, because of participants’ susceptibility to cognitive illusions. They are heuristics and biases, and deal with mental shortcuts implied by people – in everyday life and in the juridical environment as well – to reduce the mental effort of taking decisions. While this can be beneficial in some respects, cognitive illusions can also lead to systematic errors. This is why a deep investigation in this regard is fundamental for the legal practice. Empirical support has been crucial to analyse actors’ behaviour in the legal arena. In experimental settings, most participants have demonstrated that they do not conform with the description of the rational man, as intended by the rational theories of behaviour. Indeed, except for a few subjects, most have shown to be susceptible to cognitive illusions and prone to non-rational judgement. Even if this can seem a discouraging conclusion for the juridical environment, some possible solutions exist. This work has shed light on mechanisms to adjust inefficiencies due to biased behaviour and judgement through the law. In the end, the fact that the legal environment is not immune to cognitive illusions does not imply a non-functional or inefficient system but rather an imperfect one.