An Assessment of Behavioral Law and Economics Contentions and What We Know Empirically about Credit Card Use by Consumers

Abstract

“Behavioral Law and Economics” (BLE) is a specialized component of the legal literature that purports to base its conclusions on a branch of economic analysis known as behavioral economics. The central claim of BLE is that by applying findings of behavioral economics to the real world it can provide more accurate assumptions about individual behavior and decision making than neoclassical economics and thus better and more effective policy prescriptions where needed. To date, however, BLE’s claims have been almost entirely a priori, taking certain suggested biases identified in the laboratory experiments by behavioral economists and claiming that they extend significantly to actual consumer behavior and the need for regulation. Yet it is well accepted that the proper test of the scientific validity of an economic theory is the accuracy of its predictions relative to empirically testable hypotheses, not a priori reasoning or hypothetical extensions. This paper focuses on an area where BLE has been particula...