This paper assesses the current state of law and economics, standard and behavioral, and proposes an additional element to the basic belief-desire apparatus of economic theory in order to create a more unified theory of behavior.
The first part of the paper assesses the current status of standard economic theory. While standard models have had their successes, a large and growing body of empirical evidence reveals that people often fail to live up its rational-actor ideal. In response, economists usually stick with standard consumer theory and attempt to explain the anomalous results by referring to some overlooked input (e.g., some new belief) or by applying the old models in new ways (e.g., multiple-selves accounts). But there are some cases that standard approaches just can't explain, and they don't seem to have the resources needed to expand their explanatory reach.
Behavioral economics, the focus of the second part of the paper, is not without problems of its own. Chief among these is that it has not coalesced into a unified theory of behavior. This is problematic because there are inconsistent (and irreconcilable) behavioral explanations for particular bits of behavior; it is also difficult to figure out how behavioral and standard accounts fit together. The root of the problem, though, is not that behavioral models are under-theorized, but that they are under-motivated. Behavioral economists often fail to draw a distinction between empirical evidence and what it is evidence for. This sort of curve fitting approach explains why behavioral explanations are less than satisfying, and also helps explain why behavioral economics has not coalesced into a unified theory.
The usual methods for accommodating the empirical evidence regarding economic theory share the following feature: they take the basic economic account as canonical. Accept, reject, or tinker with the functional forms, most economists, standard and behavioral, confine themselves to thinking about the particular elements of common sense (namely, desires and beliefs) that originally inspired economic models. There is, however, another approach. Economic theory (and its successors) might be too distilled - after all, there is much more to our common-sense theory of behavior than the claim that people act to get what they want. Recognizing this possibility allows us to see that we can look for additional resources in common sense to enhance economic models in a top down instead of bottom up way.
The third and final part of the paper discusses one such approach based on Frederic Schick's work on understandings. Drawn from the well of common-sense psychology, the concept of understandings presents an additional element to the basic belief-desire apparatus that underlies economic theory. The idea, in a nutshell, is that people normally consider their circumstances from a particular perspective and, as a result, they act on proper subsets of their beliefs and desires that reflect their take on their situations. This approach can be readily integrated into standard economic theory and is capable of shedding crucial light on many of the situations that give standard accounts trouble (and give rise to behavioral alternatives). As such, it is a step in the direction of a more unified theory of human behavior.
Stephen E. Ellis & Grant M. Hayden, Beyond Tinkering: Economics after Behavioral Economics (2005)