Establishing Utility Function Of Law And Economics Based On Behavioral Economics

Law and Economics is an interdisciplinary subject combining economics with law. By applying economics methods and theoretical, it focuses on the formation, structure and effectiveness of both the legal systems and legal rules and their impacts on economy. From the general rules and requirements of disciplines integration, it should include the basic ideas which are integrated and refined from the basic concepts of the various disciplines. Law and Economics was first studied in the economic field, so naturally, it should comply with the concept of efficiency. However, this is contradiction with the concept of fairness and justice in law. Richard Posner tries to solve this contradiction by melting fairness and justice into efficiency. Richard's solution gives up fairness and justice which lost the sense of legitimacy, so it has not been accepted by the mainstream of jurisprudence. Therefore, Law and Economics must cover fairness and justice in its basic value in order to enter the legal practice and achieve its discipline purpose.It is necessarily to look for new analytical paradigm of the reconstruction of value in Law and Economics. That should emphasize fairness and justice and efficiency simultaneously and establish a new utility function of Law and Economics on this basis. Thus Behavioral Economics entered the vision of law and economics scholars. It is based on psychology, physiology, ethics and using experimental methods to analyze the economic phenomena. Behavioral Economics is closer to real economic and social world, so it has more powerful ability in explaining and predicting.The classic experimental "ultimatum" game, dictator game and public goods game(which are the further refinement of "ultimatum" game) in Behavioral Economics have demonstrate that fairness and efficiency are human endogenous preferences. This result is of great significance to Law and Economics. Establishing a new utility function of Law and Economics based on both fairness and efficiency can not only revise the utility function of Law and Economics mainstream emphasizing human preferences to efficiency, but also provide a theoretical foundation for Law and Economics reconstruction. By integrating the basic concepts in economics and law, the new utility function based on Behavioral Economics has achieved both empirical correct in economics and the legitimacy in law. This paper generalizes the connotation and extension of fairness from Behavioral Economics theory. We divide the various fairness into regular fairness and distributive fairness. We also analyze its effect on the utility function of Law and Economics.Empirical tests focus on regular fairness's impact on efficiency. We analyze the connotation and value judgments of efficiency. In addition, we argue"Efficiency Supremacy"in the mainstream of Law and Economics represented by Posner. The results demonstrate the efficiency is the function of regular fairness. The relationships between them are: regular fairness not only has a direct impact on the utility of Law and Economics, but also has an indirect impact through its determination on efficiency.Distributive fairness'effects on utility function of Law and Economics could be divided into three ways. First, the distribution differences have direct impact. Second, it has an indirect effect through its impact on economic efficiency. Third, it has an indirect effect through its impact on regular fairness. Therefore, regular fairness has a dominant role on distributive fairness, but distributive fairness will also affect regular fairness. In some extent, regular fairness and distributive fairness is a pair of contradictions body. By using"Rawls's two principles of justice"and"Amartya Sen's ability equality theory", we solve the contradiction in regular fairness and distributive fairness. Besides, we achieve a balance between them, which could be comprehended that the balance of basic competencies required for the protection and capacity development equality of conditions and rules are the equilibrium point of regular fairness and distributive fairness.By studying the impacts of regular fairness and distributive fairness on utility function of Law and Economics, we come to the conclusion that the utility function could be determined by three variables: regular fairness, distributive fairness and efficiency. Among them, regular fairness plays a decisive role. Distributive fairness plays an important role. Efficiency except natural factors is determined by regular fairness and distributive fairness. Combing what mentioned above, we set up utility function of Law and Economics based on the Behavioral Economics. Then we analyze the shortage supply trend of fairness which could be regained as public good. And we review the"giving priority to efficiency with due consideration to fairness."Finally, we come to the policy recommendations: giving priority to fairness with due to efficiency.