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Drobak, John N. --- "Cognitive Science" [2005] ELECD 155; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics, Second Edition" (Edward Elgar Publishing, 2005)

Book Title: The Elgar Companion to Law and Economics, Second Edition

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420321

Section: Chapter 31

Section Title: Cognitive Science

Author(s): Drobak, John N.

Number of pages: 6

Extract:

31 Cognitive science
John N. Drobak


Economists have looked to cognitive science and psychology to help under-
stand the rational actor assumption in neoclassical theory. Much of legal
theory, like economics, assumes that people act rationally or at least can be
induced to act rationally by the correct rules. The `reasonable person' stan-
dard is a hallmark of tort law. A natural extension of the economic rationality
scholarship has been the re-examination of legal rules using cognitive science
(see Langevoort, 1998). Sometimes the use of cognitive science has comple-
mented the neoclassical law and economics literature and reinforced the
conclusions reached under neoclassical theory. In connection with contract
law, however, the teachings of cognitive science raise the question of whether
some parties can truly assent to some contracts. This undercuts a basic
premise of both contract law and law and economics theory.
Cognitive scientists have reached a consensus on many aspects of human
decision making that are useful for analysing the law. The following brief
summary highlights a few of these findings. Humans have bounded ration-
ality, sometimes inherently as a result of limitations in information processing
or lack of adequate information, and sometimes intendedly as a way to
simplify complexity (Simon, 1982; Clark, 1997). Occasionally, people are
rationally ignorant because it helps to simplify a complex world. Likewise
people often use heuristics or simple rules of thumb (Kahneman et al., 1982).
Invariably, we are overoptimistic, believing that we will do better than statis-
tics show. Cognitive scientists have ...