This paper studies the scope of cooperation by analyzing a theoretical model where individuals respond to incentives but are also influenced by norms of good conduct inherited from earlier generations. Parents rationally choose values to transmit to their offspring, influenced by external enforcement and future transactions. The equilibrium shows strategic complementarities between values and behavior, reinforcing environmental changes. Values evolve gradually, and if external enforcement is chosen under majority rule, hysteresis may occur, leading to weak enforcement and discouraging cooperation. The paper explores how norms of generalized morality evolve endogenously. Parents choose values for their children, evaluating their children's welfare with their own values. This "imperfect empathy" implies equilibrium is both forward and backward looking. Values evolve gradually and are influenced by future environments. Generalized morality norms apply broadly, encouraging cooperation over a larger range of situations. The model, adapted from Dixit (2004), involves individuals randomly matched in a prisoner's dilemma game. Cooperation depends on material incentives and individual values. Norms of generalized morality apply broadly, while limited morality applies narrowly. The model shows that generalized morality norms evolve endogenously, with parents choosing values based on future environments. This creates strategic complementarities between values and behavior, reinforcing cooperation. The paper discusses how changes in external enforcement, economic geography, and globalization affect the diffusion of generalized morality norms. Improved enforcement increases cooperation, while globalization may reduce it by increasing distant interactions. The model highlights the interaction between cultural forces and economic incentives, showing how historical and cultural factors influence current institutional performance. The results suggest that institutional persistence is influenced by endogenous values and external enforcement, with initial conditions playing a crucial role in determining equilibrium outcomes.This paper studies the scope of cooperation by analyzing a theoretical model where individuals respond to incentives but are also influenced by norms of good conduct inherited from earlier generations. Parents rationally choose values to transmit to their offspring, influenced by external enforcement and future transactions. The equilibrium shows strategic complementarities between values and behavior, reinforcing environmental changes. Values evolve gradually, and if external enforcement is chosen under majority rule, hysteresis may occur, leading to weak enforcement and discouraging cooperation. The paper explores how norms of generalized morality evolve endogenously. Parents choose values for their children, evaluating their children's welfare with their own values. This "imperfect empathy" implies equilibrium is both forward and backward looking. Values evolve gradually and are influenced by future environments. Generalized morality norms apply broadly, encouraging cooperation over a larger range of situations. The model, adapted from Dixit (2004), involves individuals randomly matched in a prisoner's dilemma game. Cooperation depends on material incentives and individual values. Norms of generalized morality apply broadly, while limited morality applies narrowly. The model shows that generalized morality norms evolve endogenously, with parents choosing values based on future environments. This creates strategic complementarities between values and behavior, reinforcing cooperation. The paper discusses how changes in external enforcement, economic geography, and globalization affect the diffusion of generalized morality norms. Improved enforcement increases cooperation, while globalization may reduce it by increasing distant interactions. The model highlights the interaction between cultural forces and economic incentives, showing how historical and cultural factors influence current institutional performance. The results suggest that institutional persistence is influenced by endogenous values and external enforcement, with initial conditions playing a crucial role in determining equilibrium outcomes.