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This chapter traces efforts to expand the approach of economic thinking to political, legal, social, and religious institutions. Using rational choice analysis, these efforts move the discussion closer to value-laden areas of life. One important concern is the nature of the utility function, how it is formed, and what is utility or happiness?[CE1]Social norms, cooperation models, game theory, behavioral economics, and neuroeconomics all have something to say about human behavior,and they also have important moral ramifications. While some claim that behavioral responses in these cases are merely self-interest disguised, outward behavior seems to work best in the long run if it is heartfelt. Character traits that signal trust are strongest when backed by moral commitments, and there is evidence that human brains are hardwired with some empathetic tendencies. The work of Dan Kahneman and AmartyaSen is highlighted in the closing vignettes.

This chapter examines socialization and the process by which social norms become internalized, how this capacity for internalization could have evolved, and why the norms internalized tend to be group-beneficial. It begins with a discussion of cultural transmission and how it overrides fitness by taking account of two facts. First, the phenotypic expression of an individual's genetic inheritance depends on a developmental process that is plastic and open-ended. Second, this developmental process is deliberately structured—by elders, teachers, political leaders, and religious figures—to foster certain kinds of development and to thwart others. The chapter then introduces a purely phenotypic model in which, as a result of the effectiveness of socialization, a fitness-reducing norm may be maintained in a population. It also describes the gene-culture coevolution of a fitness-reducing norm before concluding with an analysis of the link between internalization of norms and altruism.

This chapter explores the importance of social norms and beliefs in the economy. It argues that the prosperity of the economy is affected by attitudes towards work, level of mutual trust, standard of ethics, and social norms. It uses the act of exchange to elucidate the importance of social norms as a foundation of economic activity. It discusses equilibrium-selection norms, understanding social norms in terms of evolutionary games, and positive and normative beliefs.

This chapter begins with a summary of the classical sociological solution to the problem of order advanced by Talcott Parsons. The central flaw in the solution is simply that it lacks deliberative microfoundations; it is not clear how social norms interact with beliefs and desires, the two intentional states posited by standard decision theory. A solution is proposed, which involved positing “principles” as a set of intentional states associated direction with actions. A formal representation is developed, and the attractions of the model, from the standpoint of representing a variety of different social interaction types, are then touted.

The concept of informality has encompassed an increasing number of meanings; referred to highly heterogeneous phenomena and measurement methods; and has been explored by development microeconomics (informal contracts) and institutional economics (informal institutions). This plurality of meanings and instruments calls into question the concept’s validity. This paper synthesizes the critical issues within both a development economics and an institutional economics perspective. First to be examined are the conceptual problems inherent in the concept of informality, especially its inconsistencies and the heterogeneity of the phenomena and measurement. The concept is then analysed according to an institutionalist perspective. A more relevant distinction than the formal-informal one is proposed, which relies on an alternative theory of institutions and different distinctions, particularly between the forms, contents, and meanings of institutions.

This chapter summarizes the book's main points, covering game theory, the commonality of beliefs, the limits of rationality, social norms as correlated equilibria, and how reason is bounded by sociality, not irrationality. Among the conclusions are that game theory is an indispensable tool in modeling human behavior. Behavioral disciplines that reject or peripheralize game theory are theoretically handicapped. The Nash equilibrium is not the appropriate equilibrium concept for social theory. The correlated equilibrium is the appropriate equilibrium concept for a set of rational individuals having common priors. Social norms are correlated equilibria. The behavioral disciplines today have four incompatible models of human behavior. The behavioral sciences must develop a unified model of choice that eliminates these incompatibilities and that can be specialized in different ways to meet the heterogeneous needs of the various disciplines.

This chapter focuses on reflexivity and how it operates in democratic arrangements, considering a set of possible objections to this study's argument. The first potential objection is that the study has underestimated the capacity of decentralized markets. The chapter directly compares the relative claims about democracy and markets. In doing so, it highlights the ways in which competition operates in the different environments and the relative importance of reflexivity for the two institutional alternatives. The second potential objection is that the study has failed to consider other more centralized institutional arrangements that might embody reflexivity. The chapter then considers three such alternatives: courts and judicial decision making, bureaucracy, and a hybrid form that combines informal norms within formal institutional arrangements. Drawing on the analysis of the effects of social norms on formal decision making, it also assesses whether the positive effects of social norms might, in fact, be most likely to emerge in an environment of democratic decision making.

This chapter uses epistemic game theory to expand on the notion of social norms as choreographer of a correlated equilibrium, and to elucidate the socio-psychological prerequisites for the notion that social norms implement correlated equilibria. The correlated equilibrium is a much more natural equilibrium criterion than the Nash equilibrium, because of a famous theorem of Aumann (1987), who showed that Bayesian rational agents in an epistemic game G with a common subjective prior play a correlated equilibrium of G. Thus, while rationality and common priors do not imply Nash equilibrium, these assumptions do imply correlated equilibrium and social norms act not only as choreographer, but also supply the epistemic conditions for common priors.

When a number of social scientists were given synthetic data that fitted the universal law of gravitation, they all missed the underlying pattern. Yet they found results satisfactory and complete by the current social science norms: high R ², degree of significance of input factors, and the direction of their impact. The design of this experiment can be criticized, but it still should give us pause. If some social phenomena existed that were of the form most prevalent in physics, then the quantitative methods currently dominant in social sciences might not suffice to discover them.

Considers how social norms affect the respective roles of private and public sectors. It is shown how private‐market interaction can sometimes give rise to social norms that are better than those that would arise through an initiative from a local government, so that the government at its best, sometimes codifies, strengthens, and enforces a social norm emerging from a private sector that shares in the task of enforcing this norm.

This chapter focuses on alternative ways of measuring social welfare. These alternative measurements follow three approaches. The first involves extending the national accounts to incorporate non-market goods and services and to eliminate detrimental components. A second approach identifies social norms and evaluates their satisfaction through social indicators. The third approach involves the use of psychological indicators and attempts to reach directly into the experience of welfare using surveys of subjected well-being and research on the dynamics of hedonic experience.

This chapter explains the notion of gender used in articulating the claim of gender essentialism, and begins by drawing a distinction between sex and gender. Next, it explores the nature of social norms, and social normativity because an individual's gender, being a woman or being a man, is a position associated with a social role, a complex set of social norms. One central question about social norms is why individuals are responsive to and evaluable under them. The view developed here is that for some social positions individuals are responsive to and evaluable in relation to a social role simply because they occupy the social positions that correspond to the norms. For a range of social positions, including gender, social recognition is a necessary element in determining social position occupancy.

Game theory is multiplayer decision theory where the choices of each player affect the payoffs to other players, and the players take this into account in their choice behavior. This chapter addresses the contribution of game theory to the design of experiments aimed at understanding the behavior of individuals engaged in strategic interaction. This is referred to as behavioral game theory. The chapter goes on to discusses charter virtues, defined as ethically desirable behavioral regularities that individuals value for their own sake, while having the property of facilitating cooperation and enhancing social efficiency. It presents two studies that illustrate the situational nature of preferences and the desire to conform to social norms. It then deals with the dark side of altruistic cooperation and norms of cooperation.

Does it make sense to talk about racism in contemporary democratic societies? How can one explain the durability of racial prejudice and discrimination based on belief in the idea of race in formally anti-racist democratic societies? What possible peculiarities are displayed by social attitudes in Portugal in relation to people who are seen to belong to different racial or cultural groups? This chapter studies the most recent trends concerning racial prejudice and discrimination in Portugal.

This chapter examines whether recent advances in the theory of repeated games, as exemplified by the so-called folk theorem and related models, address the shortcomings of the self-interest based models in explaining human cooperation. It first provides an overview of folk theorems and their account of evolutionary dynamics before discussing the folk theorem with either imperfect public information or private information. It then considers evolutionarily irrelevant equilibrium as well as the link between social norms and the notion of correlated equilibrium. While the insight that repeated interactions provide opportunities for cooperative individuals to discipline defectors is correct, the chapter argues that none of the game-theoretic models mentioned above is successful. Except under implausible conditions, the cooperative outcomes identified by these models are neither accessible nor persistent, and are thus labeled evolutionarily irrelevant Nash equilibria.

The work of the cross‐cultural behavioural experiments project presented in this book is rooted in the logic of game theory and the practices of experimental economics, and this chapter provides an introduction to the fundamentals of behavioural game theory, and the procedures and conventions of experimental economics. It starts by defining the main social preference terms used – self‐interest, altruism, reciprocity, inequity aversion, and then sketches game theory in broad terms and describes some basic features of experimental design in economics. Seven games that have proved useful in examining social preferences are introduced; these are the Prisoner's Dilemma Game, the Public Goods Game, the Ultimatum Game, the Dictator Game, the Trust Game, the Gift Exchange Game, and the Third‐Party Punishment Game). The games are defined formally, indicating the aspects of social life that they express, and describing behavioural regularities found in experimental studies; these behavioural regularities are then interpreted in terms of preferences for reciprocity, inequity aversion, or altruism. The final sections of the chapter describe some other games anthropologists might find useful, and draw conclusions.

This chapter details Robert Boyd's account of social learning and cumulative cultural evolution to illuminate how societies adapt to changing environments and develop ever more sophisticated tools and technology. Humans' ability to learn by imitation and their evolved trusting psychology are used to explain the centrality of social norms, and to explain why and how humans have for so long been “supercooperators.” Even in foraging societies, the extent of human cooperation vastly exceeds that of any other species. Ultimately, millennia of cumulative cultural evolution have helped create a vast “worldwide web of specialization and exchange.” Humans are unique in that “people cooperate in large groups of almost unrelated individuals to provide public goods.” Cooperation in large groups “requires systems of norms enforced by sanctions.” In larger and more complex societies, cooperation and the provision of public goods depend crucially on coercive sanctioning by third parties: institutions such as police and courts.

The global community faces several very pressing environmental challenges such as climate change, depletion of the high-sea fisheries, and unprecedented rates of biodiversity loss. Governments are in the process of designing environmental policies to address these problems unilaterally, but also collectively (in the form of international agreements). Meanwhile, private citizens and firms are observed to voluntarily take protective action. Whereas standard game theory would predict that formal government intervention can only provide an extra stimulus for protective action, there are many examples of external interventions decreasing agents' propensity to undertake socially desired activities. This chapter provides an overview of the literature on the circumstances under which formal interventions can crowd out voluntary contributions to the common good. Furthermore, it is discussed how the effectiveness of government intervention may be improved by preserving the agents' intrinsic motivation to contribute to the common good.