Declining Moral Standards and The Role of Law

This paper examines how moral rules form in the process of social learning in order to analyze the relationship between legal rules and moral rules. Members of society learn morality from the observed behavior of other members. Their incentive to act morally is influenced by their expectation of other members’ moral behavior. The moral standards of a society are built on the outcomes of such interactions over time. I show that moral standards can quickly deteriorate even if the majority of the members have a strong moral sense individually. When insufficient moral sanctions for wrongful actions are observed, the members form a belief that the society’s moral standards are lower than what they had expected. Such a belief encourages more wrongful actions and results in less incentive for the members to act morally. As the moral standards decline, moral rules may not be able to regulate behavior. Legal sanctions can prevent such a decline as they offer an objective and time-invariant level of expectation for the enforcement of rules. Hence, morality is less likely to degenerate in the presence of legal rules. I discuss how strong morality can enhance the effectiveness of law enforcement, in turn. JEL Classification Numbers: K00, D82