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If it is true that we live in a universe in which every possible future exists, then world destroying events don't matter at all.
Religious communities of people seem to have more of a "moral compass" than non religious ones, judging by my experiences of living in the UK and the US. The poor in the US South are far better people than those in the UK, I think as a result of still having some kind of religious identity. Wealthy middle class intellectual workers are pretty much the same anywhere, whether religious or not, but the poor and struggling need an emotionally satisfying story which gives them a reason not to turn to drugs, desperation and violence far more than they need welfare handouts.
State legitimacy is similarly based on such self deception, whether it uses the traditional "'cos God says so" approach, or the more modern, "'cos we won a popularity contest." idea: in neither circumstance is there any real reason why people in general should act as if the state has the right to make laws and manage people, and yet it does, apparently to the general good unless you happen to be a radical libertarian.
Surely this is the same as the happiness case: by having most people in a nation sharing the delusional belief in the legitimacy of the state, the nation as a whole benefits.
Michael: Thankyou for the correction. It is a long time since I looked at such stuff. Is there a better psychological reference for the habit-forming effects of belief, or are you denying that such a thing exists? Do you think, for example, that believers in Christianity who lose their faith will then revert to their "preferred morality", or will they retain the Christian moral viewpoint?
Michael: 'If you behave morally when no0one is watching you, new information doesn't threaten your moral foundations, as your morality is grounded in your preferences.'
I think the point of Santa is to give the parents more control over forming those preferences, using good old fashioned Pavlovian conditioning. Presumably the idea is for the moral habits to continue, even after the rewards stop being given.
Anyway, my original point was the socially conservative one that phenomena like Santa are often more complex than is originally perceived, and that replacement of them should be done cautiously. Which was a bit more on topic.
Nick - the claim is that they make you believe that you are always being watched by a moral judge, not that you behave morally when noone is watching you. I'm not sure how you'd distinguish the two in practice, however.
The problem with examples like Santa Claus is that human culture is highly complex, so that the actual effects of Santaism are hard to fathom, and harder to compare to possible alternative beliefs: if you came up with an alternative to Santa, how would you prove that it is better?
For example, I would say that Santa is less about "encouraging children to behave better in hope of receiving presents", which, as you say, sounds like bribery, and more about starting to build a sense of conscience within the child by introducing the idea of an entity which is a moral judge, and which is always observing. Civilization rests upon the internalization of such ideas - without a broad cultural morality, we are back at traditional human pastimes like feuding and lynch-your-neighbor. Are you sure that praise'n'spaceships will work as well? Am I sure that my Santa-analysis covers everything important that Santaism provides?
Just because you cannot imagine a world in which cellular energy transfer mechanisms still work, but safety matches don't does not mean that it cannot exist. Human beings being the creatures that they are, I would bet that if we ever manage to manipulate a universe with different laws of physics to our own, one of the first things we would do would be to create human analogues in that universe to experience it all the more fully - look at all the online games like Everquest or whatever is cool these days: filled to the brim with human-like creatures and magic, and not a simulation of the Krebs cycle to be found.