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Ethical Blind Spots & Regulatory Traps: On Distorted Regulatory Incentives, Behavioral Ethics & Legal Design

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Law and Economics of Regulation

Part of the book series: Economic Analysis of Law in European Legal Scholarship ((EALELS,volume 11))

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Abstract

Illegal and unethical conduct often proliferates around ethical blind spots—scenarios and situations in which ordinary law-abiding people find it difficult to identify the harmfulness of their own actions. Ideally, regulators should act to diffuse ethical blind spots by trying to improve ethical awareness of potential perpetrators, in order to reduce wrongdoing. In practice, however, regulators might have a distorted incentive to conserve ethical blind spots rather than diffuse them. Regulators seek to bolster their perceived effectiveness by demonstrating intensive and rapid enforcement activity. To do so, regulators might prefer to ignore the underlying cognitive causes of unethicality, and instead constantly sanction those wrongdoers who repeatedly fall into the same trap of unintentional wrongdoing. We explore the origins of this problem in common regulatory incentive structures and in the standard design of legal norms.

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Notes

  1. 1.

    Feldman and Kaplan (2020a).

  2. 2.

    E.g. Self (1993); Latin (1991); Tengs et al. (1995); Breyer (1993) ; Tengs and Graham (1996), pp. 371–372; Hahn (1996), pp. 208, 235–238; Parker (2003); Hahn and Hird (1991); Hahn and Sunstein (2002); Richardson et al. (1982), pp. 34–35; Shavell (1980, 1984a, b); Glaeser and Shleifer (2003).

  3. 3.

    Horn (1995).

  4. 4.

    Feldman and Kaplan (2020a).

  5. 5.

    Feldman and Teichman (2009) and Boussalis et al. (2018).

  6. 6.

    Amir et al. (2016).

  7. 7.

    Kaplow (1992), Kennedy (1976) and Gifford (1971).

  8. 8.

    See for example, Gino et al. (2010).

  9. 9.

    Miceli (2004), “The economic approach to law assumes that rational individuals view legal sanctions [monetary damages, prison] as implicit prices for certain kinds of behavior, and that these prices can be set to guide these behaviors in a socially desirable direction”; Hirsch (1988), “Laws are authoritative directives that impose costs and benefits on participants in a transaction and in process after incentives”; Shavell (2002), “It is evident that both law and morality serve to channel our behavior. Law accomplishes this primarily through the threat of sanctions if we disobey legal rules”.

  10. 10.

    For a review see Bazerman and Gino (2012).

  11. 11.

    Feldman (2018).

  12. 12.

    Mazar et al. (2008).

  13. 13.

    Mazar et al. (2008).

  14. 14.

    Feldman and Kaplan (2020b).

  15. 15.

    Feldman and Kaplan (2020b).

  16. 16.

    Feldman and Kaplan (2020b).

  17. 17.

    Merritt et al. (2010), Balcetis and Dunning (2006), Shu et al. (2011) and Chugh et al. (2005).

  18. 18.

    Bazerman and Tenbrunsel (2011).

  19. 19.

    Bazerman and Sezer (2016).

  20. 20.

    Dana et al. (2007).

  21. 21.

    Gino (2015).

  22. 22.

    Amir et al. (2016).

  23. 23.

    For a discussion of a more extensive list of causes of unethical behavior see Nicola and Cantarelli (2017).

  24. 24.

    Kennedy (1976), p. 1685.

  25. 25.

    Kennedy (1976), p. 1688.

  26. 26.

    Kennedy (1976), p. 1688.

  27. 27.

    Kaplow (1992), p. 557.

  28. 28.

    Kennedy (1976), p. 1685.

  29. 29.

    Kennedy (1976), p. 1689.

  30. 30.

    Kennedy (1976), p. 1689.

  31. 31.

    Horn (1995).

  32. 32.

    Justice Policy Institute (2012), p. 24; Bronstein (2014–2015); Rose (2015); Veto 309 (2004).

  33. 33.

    Horn (1995); another important possibility widely discussed in the literature is that of regulatory capture; Dal Bó (2006) and Laffont and Tirole (1991).

  34. 34.

    Bronstein (2014–2015), p. 543, “But telling them that you want to arrest x number of people, you have to cite x number of people, it just encourages bad performance on the part of officers”, “If citizens believe that tickets are being issued or arrests are being made for reasons other than the goal of law enforcement, which is about public safety,” says Robinson, “then their trust in the legitimacy of the system is really eroded.” “Police department activity quotas reduce police officer discretion and promote the use of enforcement activity for reasons outside of law enforcement’s legitimate goals.”; p. 572, “When enforcement activity is used as currency, it creates a danger that police officers will take enforcement action for their own personal benefit rather than for one of law enforcement’s legitimate goals”; Veto 309 (2004), “When the summons procedure is utilized in questionable circumstances, suspicions are raised that revenue enhancement and not sound police methodology is the rational [sic].”; In Its Defense, Police Dept. cites Laziness of Its Officers (2013), “all in an effort to counter testimony from whistle-blower officers who say that commanders had created quotas that pressured them to make street stops without the proper grounds.”

  35. 35.

    Justice Policy Institute (2012), p. 24, “With an emphasis on number of arrests rather than type or quality of arrest, it may be easier for police and multi-jurisdictional task forces to increase their numbers by focusing on the low hanging fruit—the people in possession of a small amount of drugs. As Harry Levine determined in his study about marijuana arrests in New York City, some police agencies conduct performance reviews of individual officers based on the number of arrests. Regardless of whether this is a de facto quota, police officers clearly have an incentive to make as many arrests as possible. Drug offenses, particularly marijuana possession, are typically seen as “safe” with little risk of injury to officers.”

  36. 36.

    Bronstein (2014–2015), pp. 543, 563; Rose (2015), “So why does numbers-based policing seem to persist in some departments? Maybe because it’s an easy way to track officer productivity. Tim Dees, a retired Reno, Nev., police officer who has also taught criminal justice, says it’s the quality of police work that counts, not the quantity. “That’s a much more difficult metric to gauge,” says Dees. “The satisfaction of the citizen, very difficult to put a value on that. And it’s much easier for, frankly, lazy administrators to make it into a numbers game.”; Numbers Game, “Mississippi’s regional drug task force funding, contingent on the quantity of drug arrests, encourages the indiscriminate use of confidential informants to increase arrest numbers over the quality and public safety impact of the drug cases.”

  37. 37.

    Harel and Klement (2007).

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Feldman, Y., Kaplan, Y. (2021). Ethical Blind Spots & Regulatory Traps: On Distorted Regulatory Incentives, Behavioral Ethics & Legal Design. In: Mathis, K., Tor, A. (eds) Law and Economics of Regulation. Economic Analysis of Law in European Legal Scholarship, vol 11. Springer, Cham. https://doi.org/10.1007/978-3-030-70530-5_3

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