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Vol 23 No 3 March/April 2018

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Scamell and Gasztowicz on Land Covenants

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Law, Psychology, and Morality: The Role of Loss Aversion

ISBN13: 9780199972050
Published: January 2015
Publisher: Oxford University Press USA
Country of Publication: USA
Format: Hardback
Price: £64.00

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Kahneman and Tversky's Prospect Theory posits that people do not perceive outcomes as final states of wealth or welfare, but rather as gains or losses in relation to some reference point.

People are generally loss averse, meaning that the disutility generated by a loss is greater than the utility produced by a commensurate gain. Loss aversion is related to psychological phenomena such as the status quo and omission biases, the endowment effect, and escalation of commitment.

Law, Psychology, and Morality: The Role of Loss Aversion systematically analyzes the complex relationships between loss aversion and the law weaving together insights from cognitive and social psychology, neuropsychology, behavioral economics, experimental legal studies, economic analysis of law, normative ethics, moral psychology, and comparative law.

It discusses diverse legal issues in private and public law, national and international law, and substantive and procedural law. Eyal Zamir provides an overview of the psychological studies of loss aversion to examine its effect on human behavior in the contexts of particular interest to the law, while discussing the impact of the law on people's behavior through the framing of the choices they encounter.

The book further highlights an intriguing compatibility between loss aversion and fundamental features of the law and various legal doctrines, while theorizing about the causes of this compatibility by drawing on insights from the economic analysis of law and evolutionary psychology. The book points to the correlation between loss aversion, deontological and commonsense morality, and the law, while proposing many normative implications.

General Interest

Part I: The Psychology of Loss Aversion

Chapter 1. Loss Aversion: An Overview
A. Introduction
B. A Brief History
C. Prospect Theory
D. Reference Points
E. Alternative Theories, Limitations, and Critique
F. Empirical Studies
G. Loss Aversion and Emotions
H. Related Phenomena
I. Professional Decisionmaking
J. Group Decisionmaking
K. Debiasing Loss Aversion?
L. Evolutionary Roots and Neural Basis
M. Impact on Other Disciplines
N. Conclusion

Part II: Understanding Human Behavior in Legal Contexts

Chapter 2. Consumer Behavior
A. Introduction
B. Framing Prices and Other Attributes
C. Limited Availability
D. Escalation of Commitment
E. Lenient Return Policies and the Endowment Effect
F. Status Quo and Omission Biases
G. Conclusion Impact on Other Disciplines

Chapter 3. The Market for Legal Services: Contingent Fees
A. Introduction
B. The Puzzle
C. Loss Aversion and Plaintiffs' Preferences
D. Loss Aversion and Defendants' Preferences
E. Conclusion

Chapter 4. Litigation and Settlement
A. Introduction
B. Standard Economic Analysis
C. Framing Litigation Outcomes and Risk Attitude
D. Settlement, Regret, and Loss Aversion
E. Default Effect and Alternative Dispute Resolution
F. A Note on Plea Bargains
G. Conclusion

Part III: Framing by the Law

Chapter 5. Legally Induced Reference Points
A. Introduction
B. Default Rules
C. Burden of Persuasion
D. Legal Reforms and Temporary Legislation
E. Conclusion

Part IV: Loss Aversion and Basic Features of the Law

Chapter 6. Correspondence between Loss Aversion and the Law
A. Introduction
B. Private Law: Tort vs. Unjust Enrichment
C. Contract Remedies: Expectation vs. Disgorgement
D. Constitutional Property Law: Takings vs. Givings
E. Criminal Law: Necessity and Bad Samaritan Laws
F. Human Rights: Civil and Political vs. Social and Economic
G. Civil Rights: Affirmative Action
H. Refugee and Immigration: Denying Entrance vs. Expelling
I. Tax Law: Tax Exemptions and Tax Withholding
J. Evidence Law: Burden of Proof in Civil Litigation
K. Civil Procedure: Preliminary Injunctions
L. Conclusion

Chapter 7. Evolutionary Theories
A. Introduction
B. Efficiency-of-the-Common-Law Theories
C. Loss Aversion and the Plaintiffs' Role
D. Assessment and Conclusion

Chapter 8. Cognitive Psychology, Commonsense Morality, and the Law
A. Introduction
B. Deontology
C. Moderate Deontology and Commonsense Morality
D. Deontology, Commonsense Morality, and Loss Aversion
E. Commonsense Morality and Law
F. Moral and Evolutionary Psychology
G. Conclusion

Part V: Normative Analysis

Chapter 9. Loss Aversion: Normative Implications
A. Introduction
B. Preliminary Issues
C. Justifying Basic Features of Extant Law
D. Legal Policymaking
E. Legal Decisionmakers' Loss Aversion
F. Conclusion