Ethical Blind Spots & Regulatory Traps: On Distorted Regulatory Incentives, Behavioral Ethics & Legal Design

Illegal and unethical conduct often proliferates around ethical blind spots—scenarios and situations in which ordinary law-abiding people find it difficult to identify the harmfulness of their own actions. Ideally, regulators should act to diffuse ethical blind spots by trying to improve ethical awareness of potential perpetrators, in order to reduce wrongdoing. In practice, however, regulators might have a distorted incentive to conserve ethical blind spots rather than diffuse them. Regulators seek to bolster their perceived effectiveness by demonstrating intensive and rapid enforcement activity. To do so, regulators might prefer to ignore the underlying cognitive causes of unethicality, and instead constantly sanction those wrongdoers who repeatedly fall into the same trap of unintentional wrongdoing. We explore the origins of this problem in common regulatory incentive structures and in the standard design of legal norms.