The University of the Pacific Law Review
U. Pac. L. Rev.
Legal analysis has not sufficiently adjusted by applying behavioral economic theory to contract law. This Article contributes to filling that gap by considering the following questions. How does the economic analysis of law account for irrational behavior? If our choices do not always result from linear, rational thinking, should we consider using behavioral economics to rethink our understanding of contract law? If we can agree that behavioral economics challenges the theoretical coherence of rational economic reasoning, should we view behavioral economics as a substitute or adjunct to law and economics? Given the explosion of work in behavioral economics that has reshaped our understanding of how decisions are made, how can we retrofit Judge Posner’s influence on the legal academy?
Part I briefly describes Posner’s brand of traditional law and economics. Next, it identifies several ways behavioral economics calls his theory into question. Part II illustrates how the patterns identified in behavioral economics provide important tools for understanding judicial decision-making in contracts cases. Part III demonstrates that amoral blind faith in traditional law and economics can provide a climate for the growth of markets that are a serious threat to public health and safety, such as markets for nondisclosure agreements used to silence victims of sexual misconduct.