Grownups have already learned the reason to follow the rules: it's what society expects, so your life will be easier and you will be able to accomplish more if you follow them. But for the most part they learned it by osmosis, intuition, and implication--as you presumably did when you grew up--because nobody made it explicit to them, either. I think that most people don't explain this to their kids because they don't understand it themselves; they've never verbalized the reason, so they're just passing on the social pressure which worked for them.

The sad thing about this is not only that it leads to parroting "courtesy" without real understanding. It's that without being able to articulate the purpose of the social contract in general, one can't evaluate the reasons for specific clauses within it. When they seem arbitrary, they're difficult to remember, and even more difficult to respect. Consciously examining the structure allows you to see patterns in it (e.g. if X is rude, putting someone in a position where they must do X is also rude), as well as compare their implied goals against your actual goals.

For example, there are a few situations where I consider a clear understanding of the situation more important than courtesy, and will press someone to explain something which would otherwise be rude to ask for. But, unless they already know me well not to need it, I'll also explain what I'm doing and why, so they know it's not simply out of disregard. Like many things (grammar, musical composition), you have to understand the rules well before you can break them intelligently. It's a lot more acceptable to violate the social contract if you understand why the part you're violating exists and have made a conscious choice not to follow it.

I suspect that, for that reason, real understanding of society and its rules would make social change easier and bring the rules themselves more in line with peoples' actual goals. The key word there is "real," though. Just a little knowledge is a dangerous thing.

The analogy I use in my head instead of games is languages. They both have rules, but "games" implies something fake, not productive, and not to be taken seriously. "Languages" are tools we're accustomed to using for everyday functional reasons, and it's clearer that breaking their rules arbitrarily has a more immediate detrimental effect on their purpose (communication).

The most common way I use the metaphor explicitly is during a misunderstanding with a friend. "Wait--what does X mean in Sammish? Z? Ohh, now I get it. In Relsquish, X means Y. That's why I thought you were talking about Y."

The nice thing about this model is that, in a game, you expect everyone to know the rules before you sit down to play. If someone doesn't follow them, they're either too ignorant to play or cheating. When you're talking to someone who speaks a different language from you (even if they're just different versions of English, like Sammish and Relsquish are), occasional confusion is a matter of course. When you misunderstand each other, no one has "broken" the rules; it's just a mismatch. You identify that, explain in other words, and move on, with much fewer hard feelings or blame.

I'd be concerned that this phrasing would raise more sociopaths... because that's how they think about morality.

The quote doesn't talk about morality. I take it to be about social rules such as what is considered proper dress, table manners, rudeness and politeness, playing nicely, and so on. At a certain age (as WTP alludes to) children become capable of understanding above that level, and they will need a proper upbringing in what is good and real at that level as well. There's another quote of WTP I could give in this connection, but I've used up my quote quota for this month.

I'd be concerned that this phrasing would raise more sociopaths... because that's how they think about morality.

Sociopaths and mature adults share that conception. Both of these groups of people tend to have also discovered that it is usually not in their best interest to discuss the subject with people who do not share their maturity or sociopathic nature respectively.

The reason a sociopath must arrive at the insight Powers proposes we teach earlier is that they cannot survive without it. Where a normal individual can survive (but not thrive) with a naive morality a sociopath cannot rely on the training wheels of guilt or shame to protect them from the most vicious players in the game before they work things out.

I predict that Powers' curriculum would produce no more sociopaths, make those sociopaths that are inevitable do less damage and result in a whole heap less burnt out, anti-social (or no longer pro-social) idealists.

Game players usually evolve some sense of honour which avoids them breaking the rules, and although they know the rules are arbitrary, they aren't willing to change them at any moment. If more frequent breaking of the rules is what you fear.

consider that there are aspects of morality common to all sustainable cultures

Care to name a few that I cannot counter with some European culture of last 3000 years, without even going any further?

Eh? On looking it up [1], it seems about as sensible as any other children's game. It encourages dexterity and fitness, it's spontaneously played by children, and it only needs a stick of chalk and a pebble. Whence this burst of antipathy to a game mentioned only in passing?

[1] It was played when I was a boy, but in the culture I grew up in, it was exclusively a girls' game. I never figured out what the rules were just from seeing it played in the street.