The price of abstraction

Behavioral law and economics’ effort to replace standard microeconomic assumptions with more realistic, yet still simple assumptions—without jettisoning a basic economic orientation toward behavior that emphasizes prices and utility maximization—has led to the acceptance of an oversimplified view of human judgment and decision-making. Supposedly descriptive claims found in Behavioral Law and Economics often ignore heterogeneity in results and interactions among variables, emphasize the existence of effects over the size of effects and their practical significance, avoid open questions about external validity, and embrace vague labels rather than delve into the multiple psychological processes and other non-psychological factors that may cause or account for behavior. The price of this abstraction is a lack of predictive and explanatory validity and an inability to provide reliable policy guidance.