 Claims (IV) and (V) assert that individuals respond to legal rules in an economic way. On classical economic accounts of rationality, an economic response is a prudential rather than a moral response. Legal rules, on the economic account, thus do give individuals reasons to act, but they are not regarded as moral reasons. A traffic sign designating a street as within a school zone both indicates that children may dart into the street and sets a reduced speed limit. Each of these indication provides the agent with reasons for action. The rule thus affects the agent’s behavior by affecting his beliefs about the likelihood of a causing an injury when traveling at various speeds and his beliefs about the expected costs of different courses of conduct. The sign and the legal rule give the agent prudential reasons for action. Economic analysis of law in its current form thus largely adopts the Holmesian “bad man” theory of law.