Free to Err?: Behavioral Law and Economics and its Implications for Liberty

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Behavioral economics is one of the most significant developments in economics over the past 30 years.  The field combines economics and psychology to produce a body of evidence that individual choice behavior departs from that predicted by neoclassical economics in a number of decisionmaking situations.  These departures from rational-choice behavior are said to be the result of the individual’s “cognitive biases,” that is, systematic failures to act in one’s own interest because of defects in one’s decisionmaking process.  The documentation of these cognitive biases in laboratory experiments has been behavioral economics’ primary contribution to microeconomics.