Smith describes merit and demerit as “the qualities of deserving reward, and of deserving punishment” (70). Part 1 focused on “our sense of the propriety or impropriety of actions”; Part 2 examines those actions’ “good or ill desert” (70).

Smith identifies gratitude and resentment as the sentiments that directly correlate with reward and punishment. In other words, those who feel gratitude come to regard the object(s) of their gratitude as deserving of reward, and those who feel resentment come to regard the object(s) of their resentment as deserving of punishment.

Sympathy determines the proper objects of gratitude and resentment. A person who “appears to deserve reward […] is the natural object of a gratitude which every human heart is disposed to beat time to, and thereby applaud” (73). Likewise, someone who seems to “deserve punishment” is the “natural object of a resentment” that is readily adopted by reasonable men (73).