The New Behavioral Law And Economics: Respecting Citizens’ Knowledge


On Monday evening, March 7th, Fordham held its annual Fred Dunbar Memorial Lecture in Law and Economics [1], where Christine Jolls [2], Gordon Bradford Tweedy Professor of Law and Organization at Yale Law School, spoke about the intersection of Behavioral Law and Economics. She advocates the position that a more accurate conception of choice, which is a reflection of a better understanding of human behavior, should inform the economic analysis of law.

Jolls described how in the economic analysis of legal rules, there is an absence of sustained and comprehensive analysis from a perspective informed by insights about actual human behavior. In contrast, this behavioral analysis is common in many other fields of economics. This is especially striking given the extent of empirical progress today, as there is a greater understanding today about the “facts” of what citizens actually know.

In Jolls’ opinion, the law should take advantage of existing empirical insights and pay closer attention to the effects of legal rules, particularly in the context of disclosure regulation. The underlying issue with disclosure regulation, Jolls explains, is that people have inaccurate perceptions and there is often difficulty in getting people to register risks of negative occurrences. Jolls calls this the “I don’t want to think about that now” phenomenon. The law can be a tool to “Debias,” or improve the accuracy of such optimistically hard assumptions. Jolls emphasizes, though, that information should be more data-focused, incorporating a more realistic conception of human behavior.

To this end, Jolls presented evidence demonstrating how different types of disclosures [3] have an impact on consumer behavior in the contexts of nutritional labeling and tobacco regulation.

A central goal of nutrition labeling is to help people understand what they are eating. Jolls discussed a randomized study that assessed whether the addition of traffic light coloring [4] on the front of pack nutrition labels made a difference in peoples’ understanding of the food’s healthfulness. [5] The study compared how people responded to two different types of nutritional labels- one containing contextual and numerical information only, and the other used additional traffic light coloring. The results show that the additions of the traffic light color-coding helps consumers make more healthful food choices about the products they are purchasing because they are able to understand the nutrient levels at a glance. Regardless of political views or expertise on nutrition, having an accurate understanding of what one is eating is a good thing, and if facial misperceptions are targeted, heated debates that rest in other aspects beyond people being factually informed can be avoided.

Jolls points out, however, that since the nutritional information is already listed, many are skeptical of the extent traffic light color-coding actually enhances people’s nutritional understanding of the food. In this light, the traffic light coloring is not an “information remedy,” nor does it provide consumers with more information. The benefits of behavioral understandings from disclosure laws can be seen more starkly in the context of tobacco regulation.

Tobacco regulation is designed to help people understand the consequences smoking has on their health. Jolls discussed another randomized study, similar in methodology to the nutrition label study, which assessed whether the addition of a visual element in a tobacco advertisement ban made a difference in an individual’s reaction to the implications of smoking. The study compared how people responded to two different types of tobacco labels- one with text only and another with an added visual element. [6] The results demonstrated that presenting the text with the photo leads to more factually accurate perceptions than advertisements with the text alone.

These studies prove that the addition of a visual aid, such as a photo or color scheme, enhances an individual’s understanding of what they are about to purchase or consume and more readily penetrates into their factual perceptions. Jolls is confident that a behavioral approach to law and economics, enhanced by a better understanding of human behavior, offers ways to make the legal system work better and actually alter consumer behavior.

[1] The Fred Dunbar Memorial Lecture in Law and Economics was established by NERA Economic consulting in memory of Fred Dunbar, Ph.D, a longtime firm member and leading securities and finance expert, and co-sponsored by the Fordham Corporate Law Center. NERA and Fordham share the belief that law and economics go hand in hand in many aspects of life, and they also share respect and admiration for the work of Fred Dunbar. Dunbar was a giant at the intersection of law and economics and held in high regard by trial judges, law professors and economic experts alike. He was an impressive individual on multiple fronts. His research agenda had a real impact and contributed to wider literature in causation, materiality and securities cases. He was also dedicated to public policy and after his position at NERA, he joined the SEC as an economic fellow where he was available to regulators and prosecutors. Dunbar had a love for teaching and was dedicated to mentoring future generations. He served as an adjunct Professor at Fordham Law and in his 30 years at NERA, he hired and successfully nurtured the careers of many people who are still senior economists and the firm today.

[2] Jolls served as a law clerk to Supreme Court Justice Antonin Scalia, received her B.A. in economics from Stanford University, a Ph.D in economics from Massachusetts Institute of Technology and her J.D. from Harvard Law School.

[3] These regulations are designed to enable consumers to make more healthful decisions.

[4] Traffic light color coding use the colors green, amber and red (learned by consumers in traffic contexts) on the package to signal that a food contains low, medium or high amounts of a particular negative nutrient and how often it can be consumed. Regular consumption is indicated using green, most of the time is indicated by amber and only occasionally is indicated by red. The colors refer to sugars, fats, saturated fat and salt (the four negative nutrients that have the greatest health significance).

[5] Counteracts the tendency of consumers to choose unhealthful food or have confusion or deception about the health status of the food they purchase.


*The comments contained within this blog are the author’s personal observations of the 2016 Dunbar Lecture.


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