What determines whether state law is rational and efficient, or irrational and inefficient? State organizations suffer from agency problems that preclude effective motivation of people by formal means alone. Perhaps effective formal institutions depend on informal institutions. What is the effect of morality on law? This article distinguishes three effects of social norms on law: expression, internalization, and deterrence. The law, by influencing people's beliefs about what others will do, might play a crucial role in determining the outcome of the enforcement of social norms. Social interactions can have multiple equilibria whenever the net cost of obeying a norm decreases with the number of obedient people. A credible state can influence the choice of multiple equilibria among citizens by pronouncing the law: expression. When law aligns with social norms, the law can use state sanctions to supplement social sanctions: deterrence. If people tend to make moral commitments to increase their opportunities, then the state has only limited power to cause citizens to internalize values. Instead, the state should prompt family, friends, and colleagues to instill civic virtue in each other. In so far as family, friends, and colleagues prefer relationships with civic-minded people, individuals have an incentive to cultivate civic virtue: internalization. A better understanding of these effects can improve social control by overcoming agency problems in the modern state.

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