Dear Adam Smith: Unacceptable Gifts
When a "gift" is not really a gift, it should not be accepted. Adam Smith responds to a concerned head of a brokerage about unethical behavior from her realtors.
Dear Adam Smith,
I am the head of a successful real estate brokerage in a small but growing market. In the last few years I’ve seen an increase in the number of gifts that our realtors receive from home inspectors, property evaluators, financial advisors, and even clients. Sometimes it’s coffee and cookies. Sometimes it’s invitations to nice dinners or parties. By the letter of the law, it is illegal for people to offer these things to my realtors but it’s a common practice and only occasionally seems to be excessive. I don’t want to be too hard on my employees but I’m also uncomfortable with how the practice seems to be growing in scope and size.
Sincerely,
Afraid to be a Scrooge
Dear Afraid,
Thank you for writing to me and trusting me with this serious concern and it is very serious.
I suspect from your letter that you have worked hard to grow and improve your business. You employ people in your community and provide a needed service to your customers. But profitable businesses can and do attract those who will lean on any advantage.
In my book The Theory of Moral Sentiments, I talk about an “impartial spectator.” The spectator observes any situation and judges without preference for the specific individuals. I suspect impartial spectators might not all together approve of the behaviors you are witnessing and I also suspect that more goes on of this than you are told.
If markets are to function well and provide prosperity, the individuals acting within them must play fair. You can think of the actions of individuals in a market like runners in a race:
In the race for wealth, and honors, and preferments, [a man] may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit.
(II. ii. 2)
The acceptance or a gift, or to use the truer, uglier word, a bribe, is to justle the other runners in our race. Self-love might whisper we deserve the gifts, but our impartial spectator cannot agree.
I myself had a similar challenge when I accepted the position of Commissioner of Customs in Edinburgh. Wanting to do a good job in the position, I read all of Scotland’s trade restrictions and found myself in gross violation of a great many of them. I was shocked. However, I knew I had to set a good example and I burnt all of my possessions that I was not supposed to have - including most of my wardrobe.
You might be worried this will cause your employees to lose respect for you or to look for other positions where these rules are not enforced. But the true esteem of esteemable others cannot be gained by allowing unethical behavior.
That degree of self-estimation, therefore, which contributes most to the happiness and contentment of the person himself, seems likewise most agreeable to the impartial spectator. The man who esteems himself as he ought, and no more than he ought, seldom fails to obtain from other people all the esteem that he himself thinks due.
(VI.iii.50)
I wish you good luck and hope that you will let your impartial spectator give you good counsel and that you and your colleagues will run a fair race.
Yours in fellow-feeling,
Mr. Smith
Editor's Note: Letters to the "Dear Adam Smith" column are not, of course, answered by Adam Smith. He died in 1790. Letters are answered by Christy Lynn, Sarah Skwire, Caroline Breashears, Janet Bufton, and Renee Wilmeth. Advice is for the purposes of amusement and education about Smith's thought. We do our best, but caveat emptor and follow our advice at your own risk.