Markets and Morality

Corruption according to Adam Smith

That awful person! How can someone be so corrupt?!

Be it Hillary Clinton, Donald Trump, or someone else, Adam Smith pointed to an answer: “This self-deceit, this fatal weakness of mankind, is the source of half the disorders of human life.”

In the same work, The Theory of Moral Sentiments, Smith points to another source of corruption: “Of all the corrupters of moral sentiments, …faction and fanaticism have always been by far the greatest.”

So faction and fanaticism are the greatest corrupters of moral sentiments, and self-deceit is the source of half of the disorders of human life. Sounds like those sources must pretty well cover it.

Related to faction and fanaticism, Smith also says: “False notions of religion are almost the only causes which can occasion any very gross perversion of our natural sentiments in this way; and that principle which gives the greatest authority to the rules of duty, is alone capable of distorting our ideas of them in any considerable degree.”

But wait! Smith writes: “The great source of both the misery and disorders of human life, seems to arise from over-rating the difference between one permanent situation and another.”

Seems he has surpassed the ceiling of 100 percent.

And there’s more. Smith speaks of burdening others with one’s own experiences, or failing to show reserve: “And it is for want of this reserve, that the one half of mankind make bad company to the other.”

Oh, and he comments on admiration of the rich and powerful: “This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition … is … the great and most universal cause of the corruption of our moral sentiments.”

On this head, Smith adds: “[N]ever come within the circle of ambition; nor ever bring yourself into comparison with those masters of the earth who have already engrossed the attention of half mankind before you.”

Now it seems like Smith has passed 200 percent in his account of the sources of vice and disorders. But there’s more – Smith writes of the ambitious pursuit of “place”: “And thus, place … is the end of half the labours of human life; and is the cause of all the tumult and bustle, all the rapine and injustice, which avarice and ambition have introduced into this world.”

Finally, two more: “To be pleased with … groundless applause … is properly called vanity, and is the foundation of the most ridiculous and contemptible vices, the vices of affectation and common lying…”

And: “The propriety of our moral sentiments is never so apt to be corrupted, as when the indulgent and partial spectator is at hand, while the indifferent and impartial one is at a great distance.”

Let’s review: He points to at least nine sources of corruption and disorder: self-deceit, faction and fanaticism, false notions of religion, overrating the difference between one permanent situation and another, want of reserve, disposition to admire the rich and powerful, the pursuit of place or status, pleasure in groundless applause, and the impartial spectator being at a great distance.

It would seem that Smith is double- or triple-counting. Some of the overage can be chalked up to exaggeration. But there are two other ways to see the matter.

First, to explain corruption, Smith might be giving not only explanations, but also explanations of his explanations: The ambitious pursuit of place leads to pleasure in groundless applause, which leads to self-deceit, which leads to corruption. Smith treats corruption with layers of explanation.

A second way to make sense of Smith is to see each source of corruption as a lens. When Smith says that self-deceit “is the source of half the disorders of human life,” we might read that as: Half of the disorders of human life can be fruitfully interpreted through the self-deceit lens. That doesn’t mean that such disorder cannot also be fruitfully interpreted through the faction and fanaticism lens, or the want-of-reserve lens, or any of the other lenses he exposits.

For example, take some Joe of 1919 who actively promoted Prohibition. Joe’s activism for Prohibition might be viewed through several of the nine lenses—self-deceit, faction and fanaticism, false notions of religion, overrating the difference between one permanent situation and another, and want of reserve.

Now turn it around to virtue. For virtues, too, we have layers and lenses. Consider the acts of writing The Theory of Moral Sentiments and The Wealth of Nations—surely virtuous acts. But think how we may apply different virtue lenses. In one respect, the acts were the author’s practice of prudence; in another respect, courage; in another, industriousness; in another, beneficence; also, more specifically, generosity; in another respect, perhaps gratitude—Adam Smith’s gratitude to the creators of civilization.


Daniel B. Klein is professor of economics and JIN Chair at the Mercatus Center at George Mason University, where he heads a program on Adam Smith.

Recommended reading: ‘Adam Smith – A Primer‘ by Eamonn Butler.

Recommended video: ‘Free Market Masters: Adam Smith‘.

1 thought on “Corruption according to Adam Smith”

  1. Posted 07/10/2016 at 13:32 | Permalink

    Nine sources of corruption? Here is another one in the modern context.

    The ‘revolving door’ is one reason why public trust in Government and Public Sector institutions has fallen to a new low. This is because lobbying and corruption rear their ugly heads every time public money crosses the boundary between the Public Sector and the Private Sector.

    Whereas media focus is on the small number of high-profile political elite who shamelessly exploit their previous relationships and know-how they have accumulated whilst in the pay of the State to line their own pockets and unwittingly skew the market in favour of their new paymasters in the Private Sector, the journey made by thousands of ordinary public servants underneath them, who are also looking to follow the example set by their political masters and cash-in on this bonanza, has escaped scrutiny.

    Of course, everyone has a right to sell their labour in the free market to whomsoever they wish, for whatever price they can command. However, the brazen way the political elite have gone about exercising this freedom without any checks and controls on the way they go about disseminating privileged information about inner workings of Government is scandalous, and always to the detriment of taxpayers – which is what they promised they would protect whilst in the pay of the State!

    The military-political-industrial complex has been the original model for lobbying and corruption from the earliest of times – indeed, the career prospects of people in the pay of the State are inextricably linked to those with the means to produce weapons systems, facilitated by the ‘revolving door’ and intense lobbying behind the scenes where it matters most, in the corridors of power inhabited by the political elite.

    At a time when the headcount at UK MoD’s defence equipment acquisition organisation at Abbey Wood, Bristol is being forcibly slashed as part of the 2015 Spending Review settlement with the Treasury, there exists an extremely high risk that departing procurement officials, including those who have not previously taken part in the assessment of invitation to tender responses, will be persuaded to pocket corresponding memory sticks (or CDs) and offer them in return for employment, to competitors of owners of these same CDs – thereby transferring innovative design solutions and Intellectual Property Rights which can then be used by unscrupulous recipients, to grab a larger share of the defence market.

    Such behaviour only reinforces the view that lower-level defence procurement officials have nothing to offer potential employers in the Private Sector (unlike the political elite), except someone else’s property! And when these people arrive on Contractors’ premises, they promptly become a burden on fellow co-workers and the payroll because they do not have the necessary skills (due to being selected for reasons other than merit) as task performers to add value to the business, only costs.

    What’s more, because many Defence Contractors do not have a ‘Code on Ethical Behaviour in Business’ in place, they will not only happily accept such proprietary information without any qualms, but also encourage its unauthorised removal from MoD Abbey Wood – yet they would not want their own CDs to fall into the hands of their Competitors.

    Such is their twisted sense of morality!
    @JagPatel3 on twitter

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