Why law and economics' perfect rationality should not be traded for behavioral law and economics' equal incompetence

The emerging movement within legal scholarship known as behavioral law and economics seeks to replace the perfect rationality assumption found in law and economics with an equal incompetence assumption. Drawing on empirical research in psychology and behavioral economics, behavioral law and economics scholars assert that all people systematically fall prey to biases and errors in their judgment and decisionmaking and that these biases and errors lead to predictably irrational behavior In adopting this equality of incompetence view, these scholars argue for changes across virtually all areas of the law and offer new justifications for legal policies that would be deemed paternalistic and inefficient in a system of rational legal actors. Unfortunately, this equality of incompetence view overlooks substantial empirical evidence that people are not equally irrational and that situational variables exert an important influence on the rationality of behavior A review of the empirical evidence on individual and situational variability in rational behavior reveals that behavioral law and economics' assumption of uniformly imperfect rationality is no more plausible than law and economics' assumption of uniformly perfect rationality. An empirical approach to rationality places the concept between perfect rationality and equal incompetence. While this middle ground position makes general theory development more difficult, it illuminates ways by which the legal system may foster rational behavior or counter irrational behavior.