I am always amazed by the number of DMs who bemoan the unheroic actions of their players, while providing them with a world in which heroism is not only not encouraged, but is actively punished.
It is not only true that the average person must be worth protecting in order to make heroic play rewarding, but it must be true that the players see this in action. NPCs should offer the PCs what little they have, not just as a reward, but because it is the right thing to do. They should offer to sleep in the barn so that the PCs can take their house (and they should be grateful when the PCs opt to sleep in the barn themselves). They should offer simple, but good, food, without expecting anything in return.
We may live in a culture where deceit and selfishness are virtues, but for the average commoner in a D&D world, deceit and selfishness are deadly.
First off, most commoners don't travel very far from their homes -- they have to live with, and rely on, the same folks for all their lives. A reputation for lying or stealing will not serve them in good stead. It is hard to overstate the importance of reputation in a pre-industrial world. Secondly, most commoners in a D&D world rely on shared resources: grazing commons, mill, millpond, storage facilities, and even to some extent arable land (for hay, if for nothing else). Thirdly, most commoners in a D&D world live in areas where punishment for infractions is swift, seldom codified, and can be made to fit the crime; there is a real imperative not to steal your neighbour's pig when the local lord can take all your livestock as a result. Finally, reliance on each other is necessary for protection in a D&D world. Not only is a group of commoners more effective against wolves than a single commoner, but by fulfilling their obligations to their local lord, they gain the right to his protection.
Among other things, this allows you (as DM) to demonstrate:
(1) The city, with its relative anonymity, is different than the country. Because everyone in a village knows each other, they behave in a certain way. In a city, it is easier to fleece the unsuspecting and still get the support you need to survive.
(2) Reputation matters. Threaten Bob the Innkeep, and you discover that you've threatened the whole village. Doors close to you that might otherwise have been open. Prices inflate everywhere. No one likes you, except that shady guy who was socially ostracized before.
(3) Feudalism is a protection racket. Actually carry out your threat against Bob the Innkeep, and all hands are against you. You are a wanted outlaw, with soldiers combing the local woodlands for your capture.
(4) Reputation matters (part 2). When Scuzzbert the Thief steals your magic sword, and it is your word against his with the local lord, it is gratifying that the entire village rises to defend your word. More gratifying still is the moment that Scuzzbert's feet stop twitching on the gallows, and he is left to the ravens.
(5) That protection racket goes both ways. As a party rises in power, the local political players/powers woo the PCs with gifts and honorifics. If the PCs return these overtures, they can make strong alliances that lead to increased security at home (and more adventure as they aid their allies to deal with problems they are having). Players can certainly be encouraged to begin this process, btw.
Another bonus is that the treacherous NPC, when used sparingly, is actually effective. This factor alone makes Gary's methodology worthwhile, IMHO.
This is very similar, btw, to DMs who want their players to talk to monsters instead of just wading in with spells and swords blazing. If you want that, you have to provide an environment that nurtures and rewards it. You have to demonstrate that it is worth doing. You have to demonstrate the pitfalls of the opposite approach.
