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International Max Planck Research School

on Adapting Behavior in a Fundamentally Uncertain World

Research

Research Fields

As an orientation the following three sample projects are presented, one for a psychologist, one for an economist and one for a lawyer.



a. Criminal Sentencing in German Courts


In international comparison, German law gives the individual judge a high degree of discretion for determining the magnitude of criminal sentences. For example a sentence for theft (§ 242 StGB) can vary between a small fine and ten years in prison. The statute, e.g. §§ 21, 23, 46, 47, only partly constrains sentencing. Although doctrine contains rules about which factors may be considered and how the sentencing range should be adjusted, it is relatively silent about how these factors should be integrated, contrary to American sentencing guidelines. This suggests that sentencing heavily relies on the cognitive processes and strategies of the individual judge, which for example could lead to regional disparities. The high degree of uncertainty involved makes sentencing decisions an exemplary candidate for heuristic decision making. Psychological research has indeed shown that in English magistrates courts, judges often rely only on part of the available information, and that the main factor determining sentence magnitude is the proposal of the prosecution. Cognitive models of the decision process should be able to address two issues: how do judges actually reach sentencing decisions, and how could this be influenced by more explicit guidelines? This is a topic that neither cognitive psychologists nor lawyers could study without input from the other discipline.



b. Individual Versus Default Rules for Hold-up Problems


On 24 May 2006, the highest appeal court in Britain, the House of Lords, awarded £5m in a divorce settlement to Melissa Miller. In making such a judgment the court defined a default parameter of what economists call a hold-up problem in an environment of incomplete contracts. Hold-up problems not only occur in marriages, they are common whenever partners, firms, or business people invest in a relationship where efforts and investments are impossible to observe and outcomes are subject to uncertainties. In such a situation a rule, like the above for marriage settlements, affects the efforts and investments of the parties. Economists argue that with a higher expected share of the joint surplus a partner will also invest more effort and resources into a relationship. We should expect partners to implement and carefully negotiate a good rule, i.e. a rule which gives partners good incentives to make good investments. In the above example Melissa and Alan Miller could have negotiated a prenuptial contract before they married. They did not, but instead used the default contract provided by the state. A small literature studies this problem, but still many questions remain to be answered.

The project should analyze why in business as well as in private relationships partners often do not negotiate individual rules but instead chose state-provided default rules. Among the many conceivable reasons we are particularly interested in assessing the conflict between fair and efficient division rules in the hold up problem. Answering such a question requires substantial input from all three disciplines of the research school. Economics provides the framework to determine the efficient solution in this hold-up problem, psychology helps us to assess how social norms, such as fairness, enter this context, and law can explain the institutional context and tell us how we come to certain default rules in different contexts (marriages, industrial partnerships, credit markets, etc.) at all.



c. Combating the Avian Flu


Under § 24 II of the German statute on epidemic animal diseases, the authorities may order that animals be killed, merely because they are "receptive" for the disease and this is a precondition for lifting a ban on trading such animals. In spring 2006, under this rule thousands of birds have been killed, after occasional instances of the avian flu have been reported in several regions of Germany. Note that these birds had not themselves been positively tested for the virus. The case mixes several elements of uncertainty. Is the animal infected? How easy is it for the virus to spread from one animal to the next? If entire populations are killed, by how much does this reduce the probability of the virus reaching different populations? How likely is it that the virus affects other birds, other animals, and eventually men? Due to constitutional law, in applying § 24 II, the authorities are constrained by the principle of proportionality. They are only allowed to interfere with farmers’ property if this serves a sufficiently relevant normative goal, and if the concrete measure is not out of proportion. What does this mean if the necessary factual knowledge may not be produced in adequate time, if generic knowledge is incomplete, and if the decision must be based on prognostic assessment? Thus far, legal doctrine gives the authorities room to manoeuvre by almost empty formulas like the "prerogative of assessment". Economic and psychological theorising on decisions under several types and degrees of uncertainty would allow to develop much clearer doctrine.

Yet the legal provision has an even more challenging dimension. If public intervention ostensibly contains the risk in precisely defined geographical areas, this is likely to have a beneficial effect on fowl markets. If consumers believe in the efficacy of the containment, demand for fowl from other regions will be much less affected. At the limit, "objectively" unnecessary harshness might be appropriate to restore generalised public trust. The ensuing normative question is patent: may farmers be forced to tolerate interventions for no better reason than this? Would they at least have to be compensated? These normative questions may only be answered if one has an understanding of the psychological mechanisms underlying public trust. Giving a meaningful answer to the doctrinal question is thus possible only for a lawyer who has a sufficient understanding of the underlying theoretical concepts, and of the empirical findings from both economics and psychology.



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