Law, Psychology, and Morality The Role of Loss Aversion

Kahneman and Tversky's Prospect Theory posits that people do not perceive outcomes as final states of wealth or welfare, but rather as gains or losses in relation to some reference point. People are generally loss averse, meaning that the disutility generated by a loss is greater than the utility produced by a commensurate gain. Loss aversion is related to psychological phenomena such as the status quo and omission biases, the endowment effect, and escalation of commitment.

Law, Psychology, and Morality: The Role of Loss Aversion systematically analyzes the complex relationships between loss aversion and the law weaving together insights from cognitive and social psychology, neuropsychology, behavioral economics, experimental legal studies, economic analysis of law, normative ethics, moral psychology, and comparative law. It discusses diverse legal issues in private and public law, national and international law, and substantive and procedural law. Eyal Zamir provides an overview of the psychological studies of loss aversion to examine its effect on human behavior in the contexts of particular interest to the law, while discussing the impact of the law on people's behavior through the framing of the choices they encounter. The book further highlights an intriguing compatibility between loss aversion and fundamental features of the law and various legal doctrines, while theorizing about the causes of this compatibility by drawing on insights from the economic analysis of law and evolutionary psychology. The book points to the correlation between loss aversion, deontological and commonsense morality, and the law, while proposing many normative implications.

Eyal Zamir is the Augusto Levi Professor of Commercial Law at the Hebrew University, where he served as Dean of the Faculty of Law from 2002 to 2005. He has been a visiting researcher or visiting professor at the law schools of Harvard, Yale, NYU, Georgetown, UCLA, and Zurich. He holds an LL.B. and Dr.Jur. from the Hebrew University of Jerusalem. Professor Zamir has authored or edited thirteen books and published some fifty articles in Israeli and American law journals, including the Columbia Law Review, the Journal of Legal Studies, California Law Review, Virginia Law Review, and the American Journal of International Law. He is co-author with Barak Medina of: Law, Economics, and Morality (Oxford University Press, 2010).