Part 3 – Trade Promotes Honesty ---- Trade Enriches, Promotes Trust, Honesty, Fairness, Tolerance, and Peace: Summary & Review of Five Essays by Walker Wright for Human Progress

  Walker Wright is a think tank policy manager with a forthcoming book, In Trade We Trust: How Commerce Makes Us More Social, which will be published by Bloomsbury. Over the past several months, he has posted five essays exploring different aspects of trade and how it benefits societies. I will summarize and review each essay in sequence. This is Part 3 of 5.

 

Why Free Economies Are Honest Economies: Market freedom rewards honesty. Regulation breeds corruption

     Honesty is related to trust, and societies that foster trust also foster honesty. Dishonesty breeds distrust and can damage social cohesion. Wright states that frequent exchange fosters mutual accountability. He notes that Adam Smith recognized that honesty and free commerce are mutually supportive and that familiarity with one another reduces cheating. He says that there is plenty of evidence that shows:

“…repeated dealings and fear of reputational damage incentivize honest behavior.”

     He shows that lab experiments support the notion that commerciality breeds honesty and shows who is trustworthy and who is not. This is because dishonesty is punished in the marketplace. Experiments have also shown that competition improves not only efficiency but also trust. Honesty is generally rewarded in trade, which makes honesty become habitual. In showing the opposite, that trade restrictions promote dishonesty, he cites Transparency International’s Corruption Perceptions Index (CPI), which measures the perceived levels of public sector corruption across numerous countries using multiple surveys of businesspeople and experts. Trade restrictions can be a strong indicator of corruption. It has also become more widely acknowledged that electronic and digital means of regulatory compliance have led to less bribery and corruption. He cites other studies that confirm that unrestricted and less regulated trade leads to less corruption.

“It appears that the friendlier a nation’s economy is to trade, the less corrupt it tends to be. Economic restrictions and regulations allow corruption to grow, instead of the economy. By reducing barriers, more trade is unleashed...”

     The graph below compares economic freedom to corruption and clearly shows that more economic freedom goes hand in hand with less corruption. Trade openness is one aspect of economic freedom.

“Freer trade makes reputation king, mitigating corrupt incentives and embedding honest norms throughout society.”

     He cites a famous study of East Germans under communism, which had severe trade restrictions compared to capitalist West Germans, in a game where the East Germans were found to be much more likely to cheat. He cites another study that found:

“More than double the number of nonmarket residents versus market residents believe that avoiding fares on public transport, cheating on taxes, and bribery are justifiable. Those from nonmarket societies are also more accepting of theft compared to those from market societies.”

     Thinking about this, it may have something to do with disposable income as well. People with more disposable income are more likely to avoid cheating to save money simply because they have more money. Thus, one might say that the poor are more likely to cheat simply because they need to preserve cash flow.

     A 2023 study concluded that there is “a universal association between markets and morality” and “a robust association between an increase in market exposure and an increase in civic morality.”

     A study of corruption in different parts of China found that deregulation and trade reduce corruption. That study concluded that:

“…a 1 percent increase in the marketization index leads to a 2.72 percent reduction in corruption. Regions that increased trade openness by 1 percent experienced a 0.35 percent reduction in corruption.”

     Wright notes that removing trade barriers leads to more commerce, where more people put their trustworthy reputations on the line, thus preserving those reputations.

“A commercial society is, at its core, a society of integrity: it limits the opportunities for corruption and encourages honest behavior in the process.”

     He summarizes this essay as follows:

“Many people assume that markets breed dishonesty, but the opposite is true. Commerce depends on trust. Repeated exchange and reputation make honesty not just virtuous, but profitable. When trade is open and competition thrives, deceit is punished and integrity is rewarded. By contrast, heavy regulation invites corruption and favoritism. A truly commercial society, grounded in voluntary exchange and mutual accountability, is also a more honest and trustworthy one.”

 

References:

Why Free Economies Are Honest Economies: Market freedom rewards honesty. Regulation breeds corruption. Walker Wright. HumanProgress.org. December 5, 2025. Why Free Economies Are Honest Economies - Human Progress