In this path-breaking book, economists and scholars from diverse disciplines use standard economic tools to investigate the formation and evolution of normative preferences. The fundamental premise is that an adequate understanding of how an economy and society are organized and function cannot be reached without an understanding of the formation and mutation of values and preferences that determine how we interact with others. Its chapters explore the two-way interaction between economic arrangements or institutions, and preferences, including those regarding social status, the well-being of others, and ethical principles. Contributions have been written especially for this volume and are designed to address a wide readership in economics and other disciplines. The contributors are leading scholars who draw on such fields as game theory, economic history, the economics of institutions, and experimental economics, as well as political philosophy, sociology and psychology, to establish and explore their arguments.

Table of Contents:
Foreword Amartya Sen; Preface Avner Ben-Ner and Louis Putterman; 1. Introduction: values and institutions in economic analysis Avner Ben-Ner and Louis Putterman; Part I. The Formation and Evolution of Social Norms and Values: 2. The simultaneous evolution of institutions and norms Robert Sugden; 3. A utilitarian theory of political legitimacy Ken Binmore; 4. Why do we care what others think of us? Chaim Fershtman and Yoram Weiss; 5. Starting with nothing: on the impossibility of grounding: norms solely in self-interest Jane Mansbridge; Part II. The Generation and Transmission of Values in Families and Communities: 6. Did father know best? Families, markets, and the supply of caring labor Nancy Folbre and Tom Weisskopf; 7. How communities govern: the structural basis of pro-social norms Samuel Bowles and Herbert Gintis; 8. The limits or moral diversity Timur Kuran; 9. Moral diversity and specialized values: some observations John Michael Montias; Part III. Social Norms and Culture: 10. Social norms as positional arms control agreements Robert Frank; 11. Gifts and bribes Susan Rose-Ackerman; 12. How do we know whether a monetary transaction is a gift, an entitlement, or a payment? Viviana Zelizer; Part IV. The Organization of Work, Trust, and Incentives: 13. How effective are trust- and reciprocity-based incentives? Ernst Fehr and Simon Gächter; 14. Worker trust, system vulnerability, and the performance of work groups Andrew Schotter; 15. Trust: beliefs and morality Jonathan Baron; 16. Who is the custodian of the custodians? Russell Hardin; Part V. Markets, Values, and Welfare: 17. Institutions and morale: the crowding-out effect Bruno S. Frey; 18. The joyless market economy Robert Lane; Epilogue: historical evolution of values and institutions Douglass North.