Behavioral and Comparative Analysis of the Information Paradigm in Consumer Law

This article examines the issue of information asymmetry in consumer law and deliberates on the necessity of regulation of the status of a consumer and their protection mechanisms. It is evident that the relevant Georgian law, by and large, does not guarantee the sufficient safeguarding level and thus the approximation to the respective EU legislation cannot be deemed successful in toto. Furthermore, this article analyzes the Draft Law of Georgia on the Protection of Consumer Rights and displays the possible challenges. In addition, the special emphasis is on consumer credit contracts. In the wake of the growing importance of behavioral analysis and its impact on the law and economics, the standard of an in- formed and rational consumer, which constitutes a cornerstone of the EU consumer law, is now highly debated. By reviewing some findings in behavioral law and economics, along with the international legislation and case law, it is argued that some im- plications of behavioralism should be taken into account in the field of consumer law.

The Paternalistic Turn in Behavioral Law and Economics: A Critique

The application of behavioral economics to law and economics has taken a paternalistic turn. Behavioralists believe that the fundamental assumptions regarding individual behavior in standard theory do not reflect reality. If individuals are not “rational” in the standard economic sense, then there will be decisionmaking failures: people cannot be relied upon to make individually optimal decisions and thus to maximize welfare as they see it. This Article is organized as follows. Part One is a prelude and gives context. Part Two discusses the fundamental normative standard in behavioral public policy: true preferences. I then proceed to outline the causes of the divergence between true preferences and actual observed preferences. Part Three analyzes some of the knowledge problems is ascertaining the presence of cognitive and behavioral biases. Part Four presents a case study of the difficulties of behavioral policy analysis in the area of consumer credit. Part Five concludes.

Moral Norms, Adaptive Preferences, and Hedonic Psychology

In a series of important papers published roughly twenty years ago, Professor Robert Cooter developed a comprehensive economic theory of moral norms. He explained the value of those norms, described the process by which norms are adopted, and offered a set of predictions regarding the circumstances under which an individual will choose to adopt a particular moral norm. This brief Article applies behavioral law and economics and hedonic psychology to expand upon Professor Cooter’s path-breaking theory. In particular, understanding welfare in hedonic terms — rather than preference-satisfaction terms — suggests a multitude of further situations in which individuals will justifiably seek to internalize moral norms. The hedonic approach to welfare then further suggests an enhanced role for the government to play in encouraging the adoption of welfare-enhancing norms. Cooter’s theory, combined with modern understandings of welfare and human behavior, thus offers powerful predictive and prescriptive possibilities.

Changing People’s Preferences by the State and the Law

In standard economic models, two basic assumptions are made: the first, that actors are rational, and the second, that actors’ preferences are a given and exogenously determined. Behavioral economics — followed by behavioral law and economics — has questioned the first assumption. This Article challenges the second one, arguing that in many instances, social welfare should be enhanced not by maximizing satisfaction of existing preferences but by changing the preferences themselves. The Article identifies seven categories of cases where the traditional objections to intentional preference change by the state and the law lose force and argues that in these cases, such a change warrants serious consideration. It then proposes four different modes of intervention in people’s preferences, varying in intensity, on the one hand, and in the identity of their addressees, on the other, and explains the relative advantages and disadvantages of each form of intervention.

Economía conductual de la protección al consumidor en el e-commerce colombiano

A través de los conceptos de la escuela Behavioral Law and Economics, este artículo explora, en el derecho colombiano, las razones que explican por qué la necesidad de un trato diferente en la protección del consumidor en el entorno electrónico, tanto desde la perspectiva de disminución de los costos asociados a la desconfianza, como desde la de elevar relativamente los conexos a las reclamaciones del consumidor, para lograr una compensación normativa que induzca conductas eficientes de costo y consumo.

Innovation, Ethics, and Consumer Protection

In recent years, firms that rely on fintech to develop and deliver financial products and services have become increasingly important in the banking and financial sector. Nevertheless, fintech products raise various ethical and legal issues, particularly relating to consumer rights. These issues can be analyzed in the light of behavioral law and economics which suggest that prevalent cognitive biases systematically affect the judgment of individuals. To mitigate this bounded rationality, it is possible to guide the decision-making processes through the use of nudges and configured sets of choices. A good example is fintech gamification, defined as the use of game-related mechanisms in other areas, particularly websites or social networks. However, the use of nudges for commercial purposes is often associated with some form of manipulative tactics explicitly aimed at exploiting individuals' biases without their consent. In this context, recourse to the law is useful as it provides for the minimum requirements needed to regulate the relationship between a firm and its customers.

Limits of Personalization of Default Rules

The ‘personalization of the law,’ based on new technological possibilities such as algorithmic analysis of Big Data, is said to be the wave of the future. Especially default rules seem to be particularly apt for personalization, because they are – at first glance – supposed to mirror what the parties would have wanted. This article aims to unveil the limits of preference-based personalization of default rules. In the first part, I attack default rule personalization on theoretical grounds. I analyze the theoretical underpinnings of default rule personalization, which I describe as ‘empirical subjectivism,’ and I challenge this position with arguments from classical and behavioral law and economics. I thereby develop the opposite explanatory model: ‘normative objectivism.’ The arguments presented also provide new insights of default rule analysis which are valid well beyond the personalization debate. The ‘default rule paradox,’ ‘pushing vs pulling default rules,’ or the analysis of default rules as ‘property rules’ and as ‘rules of civility’ are some examples. In the second part, I attack default rule personalization on constitutional grounds with particular focus on the Constitutions of the United States and Germany, as well as the European Charter of Fundamental Rights. So far, neither default rules nor personalization have received a detailed analysis based on constitutional principles. My article provides this analysis with regard to the principles of freedom and equality. I show how personalization reduces freedom in the private and public sphere, because the so-called choice- or agency-dimension of freedom will be significantly limited. In broader terms, the paternalistic tendencies of personalization will trigger the replacement of the ‘entrepreneur’ and ‘citizen’ by the ‘consumer’ as role-model of societal organization. Economically, this development will be accompanied by a shift from capitalism to what I call ‘micro-socialism.’ With regard to the principle of equality, I analyze how personalization leads to inequality by distinguishing ‘intra-preference-classifications’ and ‘inter-preference-classifications.’ I then present justification problems, especially with regard to discriminations that trigger strict and intermediate scrutiny. Finally, I sketch out how personalization would dissolve the essence of the principle of equality and thereby trigger a shift ‘from contract to contact’ or ‘from association to accumulation,’ which is no less important than the previous societal shift ‘from status to contract’ or ‘from community to association.’ In sum, the article combines different discourses around default rules, personalization, and constitutional law, and thereby provides new insights in each of them.