Taking Behavioralism Seriously: A Response to Market Manipulation

Jon D. Hanson, Yale Law School
Douglas A. Kysar, Harvard Law School


In this Article, we will attempt to climb out of the hole in which Henderson and Rachlinski have placed us. Although we had anticipated writing a shorter article with a slightly different thrust, we very much appreciate the opportunity to address the issues raised by Henderson and Rachlinski, some of which others have also raised, and to clear up aspects of our previous work that may have been confusing or incomplete. Thus, we will respond to Henderson and Rachlinski's specific challenges and describe more particularly the role of enterprise liability as a mediating structure between manipulable consumers and exploitative manufacturers. In doing so, we will generally assume, as Henderson and Rachlinski do, that the goal of the products liability system is efficiency, by which we mean the reduction of accident costs through adjustments in the frequency of product usage, the making of all costjustified investments in care, and the allocation of remaining accident costs to those parties best situated to bear them. That notion of efficiency has long been the central normative measuring stick in the products liability debate. As will be seen, however, the notion is beginning to appear somewhat wooden in the context of more sophisticated understandings of human cognition, risk awareness, preference formation, and decisionmaking. Indeed, the next great challenge for products liability scholars may be to articulate a coherent alternative goal for products liability law, given that the efficiency goal and the rational actor model, as conventionally understood, often require analysts to ignore (or treat as exogenous) many considerations that cognitive theorists have demonstrated are pivotal to people's perceptions of products, perceptions of risks, preferences, and reactions to adverse outcomes.