Limits of Personalization of Default Rules

Abstract

Abstract The ‘personalization of the law,’ based on new technological possibilities such as algorithmic analysis of Big Data, is said to be the wave of the future. Especially default rules seem to be particularly apt for personalization, because they are – at first glance – supposed to mirror what the parties would have wanted. This article aims to unveil the limits of preference-based personalization of default rules. In the first part, I attack default rule personalization on theoretical grounds. I analyze the theoretical underpinnings of default rule personalization, which I describe as ‘empirical subjectivism,’ and I challenge this position with arguments from classical and behavioral law and economics. I thereby develop the opposite explanatory model: ‘normative objectivism.’ The arguments presented also provide new insights of default rule analysis which are valid well beyond the personalization debate. The ‘default rule paradox,’ ‘pushing vs pulling default rules,’ or the analysis of default rules as ‘property rules’ and as ‘rules of civility’ are some examples. In the second part, I attack default rule personalization on constitutional grounds with particular focus on the Constitutions of the United States and Germany, as well as the European Charter of Fundamental Rights. So far, neither default rules nor personalization have received a detailed analysis based on constitutional principles. My article provides this analysis with regard to the principles of freedom and equality. I show how personalization reduces freedom in the private and public sphere, because the so-called choice- or agency-dimension of freedom will be significantly limited. In broader terms, the paternalistic tendencies of personalization will trigger the replacement of the ‘entrepreneur’ and ‘citizen’ by the ‘consumer’ as role-model of societal organization. Economically, this development will be accompanied by a shift from capitalism to what I call ‘micro-socialism.’ With regard to the principle of equality, I analyze how personalization leads to inequality by distinguishing ‘intra-preference-classifications’ and ‘inter-preference-classifications.’ I then present justification problems, especially with regard to discriminations that trigger strict and intermediate scrutiny. Finally, I sketch out how personalization would dissolve the essence of the principle of equality and thereby trigger a shift ‘from contract to contact’ or ‘from association to accumulation,’ which is no less important than the previous societal shift ‘from status to contract’ or ‘from community to association.’ In sum, the article combines different discourses around default rules, personalization, and constitutional law, and thereby provides new insights in each of them.