There is a form of prisoner’s dilemma here: if Smith is just, then it pays Jones to be unjust in order to take advantage of Smith’s pathetic naïveté and gullibility; if Smith is unjust, then Jones can best protect himself from Smith’s wickedness and rapacity again by being unjust himself. And vice versa. As a result, both end up unjust and nipping social cooperation in the bud, whereas their collective well-being would be far greater if both were just.

Smith Just Smith Unjust
Jones Just (10, 10) (-50, 50)
Jones Unjust (50, -50) (-10, -10)

Hence the need for a state that would punish an individual for his own injustices. The punishments, like certain luxury taxes, are meant to be avoided by all members of society in order to shift the equilibrium to everyone’s benefit to (10, 10).

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