ABSTRACT
The starting point of much economic thinking is the assumption of individual rationality. While the word rationality often implies different things in different disciplines, in economics this term means that in situations involving strategic decision making, the people making those decisions care mostly about their own monetary payoffs; or they care about their own satisfaction (or “utility” as economists refer to it) where that utility is primarily a function of the monetary payoffs accruing to them or their kin. In other words, humans are primarily motivated by “self-regarding” preferences. But we now have voluminous evidence that in a wide variety of economic transactions social norms and norm-driven behaviour, such as notions of fairness, willingness to be generous towards or cooperate with strangers, willingness to trust strangers and reciprocate others’ trust, play a crucial role.
