Regulating Uncertainty

More often than not, laws are meant to regulate human behavior. However, human beings’ reactions to such regulations are to a large degree uncertain and one can only try to predict them. In that regard, the neighboring field of behavioral economics might provide relevant and necessary insights for effective regulation. However, the Court of Justice of the European Union might, should, or ought to rely on such findings when interpreting European Union (EU) secondary law, to give such rules the most effective meaning by limiting possible infringements on individuals’ fundamental rights. Built on an assessment of the Market in Financial Instruments Directive II (MiFID II), as part of European capital markets law, and with references to consumer protection law, the Taxonomy Regulation, and other European legal acts, this paper, first of all, demonstrates that not only the European legislator but also the Court can, in most situations, rely on behavioral economic findings. Although human behavior as well as results stemming from experimental research are to a certain degree uncertain, concepts developed in behavioral economics describe human behavior better than concepts implying (fully) rational behavior. In addition, obstacles – stemming from both the field of behavioral economics and legal methodology – that arise when applying these experimental findings to interpreting EU secondary law will be summarized and ideas to counter those obstacles are presented. The overall objective of this paper is to further a discussion on how to best incorporate findings from the field of behavioral economics into legal methodology. For this, the paper references, among others, European capital markets law but strives to abstract and generalize key aspects to facilitate a broader reception and discussion.