How Representativeness Heuristics Impact People’s Decision in Economics and Law?

Abstract

This paper illustrates how representative heuristics lead to shortcuts in mind that cause irrational decision-making affects the economy and law. It discusses the following three case studies, the 17th-century Dutch tulip mania, the wrongful conviction of Sally Clark in England, and the rise of the gluten-free diet. Research shows that social mimicry, misunderstanding statistics, and misleading health information may cause irrational behaviour. These factors contribute to considerable risks, economic failure, miscarriages of justice, and the spread of misinformation about public health. The paper suggests suggestions such as, better statistical education, regulatory reform, increased consumer awareness, and stronger regulation. In addition, it connects historical events to current challenges through interdisciplinary collaboration. The paper also emphasises the importance of addressing cognitive biases in finance, law, and public health. These solutions are based on behavioural economics, legal theory, and consumer psychology to help solve real-life problems. Future research should focus on three main areas: cross-cultural studies, long-term studies, and examinations of how new technologies might alter decision-making processes.