Altruistic Punishment and Citizenship
One of the most interesting things to come out of behavioral and experimental economics in my opinion is the idea of "altruistic punishment." The idea is simple: strangers are perfectly willing to punish each other for inappropriate or nefarious behavior, even if such punishment is costly to the person meting it out and even if the people involved are guaranteed to have no future interaction. This result is not surprising if you think about real life social interactions but it deals a serious blow to orthodox economics where every individual is seen as a purely selfish utility maximizer.
By itself, altruistic punishment poses a real puzzle to those of us who think about the world strictly in terms of incentives. For people like sociologists, on the other hand, it is perfectly natural that people would want to punish each other for failing to follow social norms. Fortunately, economics is slowly absorbing insights from sociology to explain things like altruistic punishment.
Here's the basic idea (coming from a non-sociologist): every one of us has a "social identity" or a set of rules and behaviors that establish us as members of a certain social group (middle-class white suburban American or upper-class, upper-caste urban Indian, for instance). Having this set of rules or social norms implies two things. First, I will feel badly if I fail to live by the rules of my group. So as an American who has been told from day one that littering is a terrible and disgusting thing to do, my conscience will bother me if I litter and I will feel embarrassed about doing it. Second, I will feel a need to enforce this social norm upon others. I will at the very least feel a little annoyed seeing someone else litter and, if I am in a gutsy mood, might accost him in public. Even if I personally don't accost the litterer, I will feel good when I see him punished and have the knowledge that justice has been served.
This second implication of social identity is at the heart, in my view, of altruistic punishment. We want to punish people for violating social norms because we feel that they are cheating and taking advantage of honest people in society. It outrages us that such people exist and can get away with what they are doing and so we might feel moved to punish them even at cost to ourselves. So here's the big question: why do social norms prohibit littering in America but not in India (you can replace littering with bribery or bad driving with similar results)? It is surely no less of a disgusting habit in India as anyone who has walked down any major street in Delhi can attest to. Is it because Indians are less likely to identify with one another as members of the same "group" than Americans? Perhaps too much social fragmentation leads people to not care about violating social norms with the result being the ultimate breakdown of those social norms and the inability to establish new social norms.
A public policy implication of this is that in the absense of strong law enforcement, cosmopolitan places like New York City or Singapore have no informal, social mechanism for enforcing basic behavioral norms in public. This is reflected in the way these cities operate: police routinely arrest or fine people for petty, nuisance crimes that are seen as lowering the quality of life (begging, graffiti, jaywalking, unlicensed street-vending, etc.). Over time, it may be that people develop a common notion of citizenship and social identity that replaces the need for such vigorous policing. However, in some places where common bonds of citizenship do not exist or are very weak, strong policing may be the only way to establish social order initially.