Embodied Rationality

Barbara Spellman and  Simone Schnall recently posted their fascinating paper, Embodied Rationality, on SSRN.  Here’s the abstract.

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In the last decade, many cognitive and social psychology researchers have been inspired by the notion of “embodied cognition” – that cognition is grounded in actual bodily states, and that cognition takes place in the service of action. Consider two examples: (1) when wearing a backpack people perceive hills to be steeper than when not wearing one; (2) when holding a cup containing a hot drink people rate another person as more warm and friendly than when holding a cup containing a cold drink.

Findings such as these suggest that behavioral law and economics’s emphasis on “irrationality” in decision making could benefit by considering work in embodied cognition. Accordingly, this paper exploits recent research and theory on embodied cognition to find lessons for behavioral law and economics and theories of rationality.

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You can download the paper for free here. For a sample of related Situationist posts, see “The Embodied Cognition Bonanza!,” “The Embodied Situation of Metaphors,” “Our Metaphorical Situation,” “The Situation of Metaphors,” “Bargh and Baumeister and the Free Will Debate — Part I & Part II” “The Situation of Body Temperature,” “Social Psychology and the Unconscious: The Automaticity of Higher Processes,” “Unclean Hands,” “The Body Has a Mind of its Own,” “Ideology Shaping Situation, or Vice Versa?,” “The Situation of Snacking,” “The Situation of Imitation and Mimickry,” and “The (Unconscious) Situation of our Consciousness – Part I, Part II, Part III, & Part IV.”

Stare Decisis is Cognitive Error – Abstracts

Situationist fellow, Goutam Jois recently posted a fascinating, situationist paper provocatively titled, “Stare Decisis is Cognitive Error” on SSRN:  Here’s the abstract.

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For hundreds of years, the practice of stare decisis – a court’s adherence to prior decisions in similar cases – has guided the common law. However, recent behavioral evidence suggests that stare decisis, far from enacting society’s true preferences with regard to law and policy, may reflect – and exacerbate – our cognitive biases.

The data show that humans are subconsciously primed (among other things) to prefer the status quo, to overvalue existing defaults, to follow others’ decisions, and to stick to the well-worn path. We have strong motives to justify existing legal, political, and social systems; to come up with simple explanations for observed phenomena; and to construct coherent narratives for the world around us. Taken together, these and other characteristics suggest that we value precedent not because it is desirable but merely because it exists. Three case studies – analyzing federal district court cases, U.S. Supreme Court cases, and development of American policy on torture – suggest that the theory of stare decisis as a heuristic has substantial explanatory power. In its strongest form, this hypothesis challenges the foundation of common law systems.

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You can download the paper for free here.

Self-Handicapping and Managers’ Duty of Care – Abstract

David Hoffman‘s intriguing new article, “Self-Handicapping and Managers’ Duty of Care,” just came out in Wake Forest Law Review. It is also available on SSRN. Here’s the abstract.

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This symposium essay focuses on the relationship between managers’ duty of care and self-handicapping, or constructing obstacles to performance with the goal of influencing subsequent explanations about outcomes. Conventional explanations for failures of caretaking by managers have focused on motives (greed) and incentives (agency costs). This account of manager behavior has led some modern jurists, concerned about recent corporate scandals, to advocate for stronger deterrent measures to realign manager and shareholder incentives.

Self-handicapping theory, by contrast, teaches that bad manager behavior may occur even when incentives are well-aligned. Highly successful individuals in particular come to fear the pressure of replicating past success. To avoid the regret associated with the future failure that they anticipate, such individuals then create hurdles (through active or passive self-sabotage) or excuses. When failure comes, individuals hope to shift attention from their merits to the handicap. Research shows that self-handicapping works. Indeed, managers in failing firms who self-handicap may escape with their reputations and compensation burnished.

In this essay, I summarize an extensive body of research on self-handicapping that surprisingly has not been well explored by corporate law theorists. I then suggest that modern corporate scandals traditionally understood as products of failures of monitoring – like Enron – might be better explained in part as a function of self-handicapping by managers. This explanation supports recent efforts to move beyond a purely carrot-and-stick model of corporate governance. Finally, I briefly discuss mechanisms to reduce self-handicapping by corporate officers, in particular, making them self-aware and selecting executives less prone to engage in this type of wasteful activity. The law has a potential role to play in this process, but its proper focus is directors’ negligence in hiring, not managers’ failures in taking business risks.