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Bias Arbitrage, Amitai Aviram

Washington and Lee Law Review

The production of law-including the choice of a law's subject matter, the timing of its enactment and the manner in which it is publicized and perceived by the public-is significantly driven by an extra-legal market in which politicians and private parties compete over the opportunity to engage in bias arbitrage. Bias arbitrage is the extraction of private benefits through actions that identify and mitigate discrepancies between actual risks and the public's perception of the same risks. Politicians arbitrage these discrepancies by enacting laws that address the misperceived risk and contain a "placebo effect"--a counter-bias that attempts to offset the pre-existing …