(1).
It is argued that The Theory of Moral Sentiments provides a specific foundation of Smith's economic theory and that this foundation is essentially a theory of basic social institutions. The institution may be defined as a community in which people get together in groups and their general behavior is determined as the basis of social institutions.
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.""(1) The theory basically states that unlawful accumulation of wealth does not mean beneficial to the collector or the nation. It is harmful to the deprived and to the whole nation as wrongful accumulation robs the government also. 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. (2).
There has been considerable controversy as there is contradiction between Smith's emphasis in the Moral Sentiments on sympathy as a fundamental human motive, and the key role of self-interest in the Wealth of Nations.
