Abstract: How important is the internalization of values by citizens to the effectiveness of the state? Civic acts by citizens help the state to overcome potentially crippling agency problems. Law influences the behavior of citizens through expression, deterrence, and internalization. Distinguishing these effects shows the importance of each, and also shows why the state can express and deter more easily than it can induce citizens to internalize values. In a rational, self-interested theory of the internalization of values, people change their preferences to increase their opportunities for cooperation with others. Since officials have remote relationships with citizens in modern states, the state lacks the information needed to reward virtuous citizens. Instead of promoting civic virtue directly, the state must rely on families, friends, and colleagues to encourage civic virtue. To achieve this goal, the state must first align law with the social norms that facilitate private cooperation.