The present chapter maps the literature of ethical decision-making in psychology and management and examines the ways in which it could shape behavioral law and economics. The chapter examines the important paradigms and biases that have been developed in this area. Although there has been a significant advance in the understanding of ethical decision-making, conflicting paradigms attempt to describe how good people are responsible for bad deeds. The chapter explains the principal taxonomies, highlighting their strengths and weaknesses. On the normative side, the mechanisms developed by this literature uncover the limited ability of current enforcement strategies to shape behavior. The chapter makes suggestions on how to overcome these limitations and address the unaware, automatic unethical behaviors that are described by the bounded ethicality literature.
