Duke Law and Economics Society.
​Fifth Annual Triangle Law and Economics Conference​.
Rethinking Finance:
The Panel.
How may regulations based on Behavioral Economics improve financial decisions?
Panelists discuss whether implementation of behavioral regulations would prove too complex and have unintended consequences. Included is whether regulators' own intuitions about what is effective are at odds with statistical findings showing otherwise, perhaps evidencing biases similar to those they intend to address through regulation.
Lawrence Baxter
Professor, Duke Law.
Lawrence Baxter moderates this panel. He asks, "How may behavioral economics improve financial regulations?" He also questions the efficacy of existing regulations, and how business strategies of financial institutions may be informed by behavioralism. Click below to see panelist introductions, questions, and his own thoughts on the topic.
Christian Broadbent
General Counsel, SEC.
The SEC recognizes the effect of biases and heuristics within finance. Overconfidence and loss aversion are very common. In response, the SEC preaches disclosure and education. To step into "prudential" regulations, however, would require a wholesale change in approach. Although there is an ongoing dialogue about this, this change is not likely to happen.
John Payne
Professor, Fuqua School of Business.
Studies have shown that disclosure and education almost never work to improve a financial consumer's decision-making. People are generally lazy, so smart defaults must be used to guide their use of disclosed information. For example, let's require consumers to consult two different brokers before obtaining a mortgage.
Robert Johnson
Senior Executive VP, BB&T Corp.
Investment products are shaped by behavioral economics. They help tailor better products for customers. Their use, however, is dictated by the culture of the institution. To dictate this by regulation may invite unintended consequences, which should be investigated beforehand. Until then, the law should remain the "lowest common denominator."
James Cox
Professor, Duke Law.
In many ways behavioral economics is the most important component of teaching financial legal doctrine. Judges are even beginning to implement it into case law. However, it may just be too complex to yield meaningful results just yet. Nevertheless, the market is providing solutions to some of the problems behavioralism intends to fix.