Behavioral Equity
Abstract: Legal systems sometimes employ ambiguous standards and moral language in instructing people to behave. Economic analysis of such directives, often associated with “equity” or “abuse of right,” focuses on their role in deterring opportunists or in saving the costs of ex ante specification – or finds them problematic as too chilling of behavior. Rational choice approaches to equity expect ambiguity to increase the cost of deciding how to behave, which at best is intended to nudge people toward greater compliance, assuming a certain risk aversion on their part. Or ambiguity may harm opportunistic and "bad" individuals than "good" people because the former have greater difficulty circumventing an ambiguous law. The present paper challenges these behavioral assumptions and the legal paradigms that are based on them. We use the findings of psychology, behavioral economics, and behavioral ethics to revisit three main related assumptions of the rational choice approach to equity, by developing three points: first, not only bad people try to circumvent the law; second, behavior depends on the relationship between specificity, trust, and the type of motivation triggered; and, third, moral priming has a different effect on good versus bad people. Based on these three modifications of rational choice assumptions about the law versus equity distinction, we suggest two normative prescriptions: first, we offer a dynamic “acoustic separation” model that attempts to examine the effect of law versus equity on both good and bad people; and second, we offer an initial taxonomy of the optimal mixture of law versus equity.
