An institution is defined as a behavior rule governing the actions of individuals in reoccurring day to day life. The rule is generally recognized within the community, providing the basis for constant shared views regarding decisions or.
Behavior, including the view that deviation from the rule will be subject to punishment, thereby leaving the individual worse off than conforming to the rule. This is the situation for the decision problem called prisoners' dilemma.
"Unrestrained selfishness, rather that leading to productive effort is more likely to lead to a pursuit of the easiest means by which one may enrich oneself, including harmful predatory practices. Unrestrained selfishness on the part of all individuals would result in a fight for redistribution without increasing the wealth of the nation. As a result, all individuals would be worse off, at least in the long run, than they possibly could be and, in fact, than they expected to be" {Elsner, 196). This is also the basis for Smith's social theory. "Smith's social theory begins, in a logical sequence, with the assumption of two.
Competing basic 'motives' of individuals -- the egoistical 'motive' and what we shall call the 'motive of social approval" (Elsner, 196). The egoistical "motive" involves a basic behavior that will make better or richer the individual without producing a product that will increase the wealth of the nation. The second motive, 'motive of social approval' involves from the natural law. Nature, when she formed man for society, endowed him with an original desire to please, and an original aversion to offend his brethren. She taught him to feel pleasure in their favorable, and pain in their unfavorable regard. She rendered there.
Approbation most flattering (for its own sake; and their disapprobation most mortifying and most offensive. [Smith 1759,III.2.6, p. 116, Smith 1759, p.116; see also III, 1.4,p.111]. This motive presupposes the existence of a society upon which an individual depends emotionally and from which the individual can get approval.
