Hindsight-biased Courts and the Efficiency of the Legal System
28 Pages Posted: 8 Mar 2014
There are 2 versions of this paper
Hindsight-biased Courts and the Efficiency of the Legal System
Hindsight Biased Courts and the Efficiency of the Legal System
Date Written: March 6, 2014
Abstract
This paper examines the implications of a cognitive deficiency called “hindsight bias” on two legal standards: negligence and probable cause. This focus illustrates the implications of hindsight bias depending on whether a court intervenes following a failure vs. success in risk management (respectively). When the court applies the negligence standard, I find that hindsight bias discourages (encourages) preventive measures that reduce the likelihood (severity) of an accident. When the court applies the probable cause standard, I show that hindsight bias discourages aggressive searches that increase the likelihood of police seizures. I also study the effectiveness of counterfactual thinking as a remedy for hindsight bias, and find that it is only unambiguously effective under the probable cause standard.
Keywords: hindsight bias, law and economics, negligence, probable cause
JEL Classification: D03, K13, K14
Suggested Citation: Suggested Citation