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date: 17 June 2021

Abstract and Keywords

Classical contract law, Chicago economics, and Chicago law-and-economics all assumed that people rationally maximize their utility. However, just as classical contract law was supplanted by modern contract law, so Chicago-style law-and-economics is being supplanted by a school of law-and-economics based on behavioral psychology or behavioral economics. The shift to behavioral law-and-economics, which is still under way, has arrived in three waves. The first wave showed that actors often make decisions without being fully informed, without adequately processing the available information, and without bringing to consciousness critical assumptions that underlay their decisions. The second wave showed that in certain areas, actors systematically make decisions that are not rational. The third wave shows that in making decisions, contracting actors are often motivated by moral principles as well as by wealth-enhancement.

Keywords: classical contract law, modern contract law, Chicago law-and-economics, behavioral law-and-economics

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