Here are two distinctions that can help:
1. The Public/Private Distinction
Sometimes it seems that people need to be caught doing something wrong before they really feel bad about what they done.
Think of philandering politicians who continue their affairs in private and, only when discovered, do they appear to feel suitably bad.
This is troubling for a well-functioning society because it means that moral norms are insufficiently internalized.
Which emotion, guilt or shame, seems underdeveloped in these cases?
Guilt is the “painful feeling of self-reproach resulting from a belief that one has done something wrong or immoral” (Webster’s new world dictionary, 1982).
Shame is the “painful feeling of having lost the respect of others because of the improper behavior, incompetence, etc. of oneself or another”(Webster’s new world dictionary, 1982).
Guilt seems the better answer to this question because it is not dependent on others knowing about one's wrongdoing for it to arise.
It doesn't take a Raskolnikov to realize that guilt is extremely important human emotion. In a way, it serves as emotional proof that we have a robust conscience. Would our conscience actually guide our moral behavior if we did not expect to feel guilty when failing to do the right thing?
Now suppose someone fails to feel bad even when a wrongdoing is made public?
Shame would be underdeveloped in this case because, by definition, it appears linked to public evaluation.
It is also an extremely important human emotion.
Our capacity to feel shame surely keeps most us following moral norms when we have any sense that failing to do so will be public knowledge --- even when our guilt feelings are feeble.
And so, guilt arises in us when we feel bad about what we've done regardless of whether anyone knows about it.
Shame typically arises when our wrongdoings are known to others. Indeed, we can be "shamed" into feeling bad when, prior to the exposure, we were little troubled by what we had done wrong.
2. The Role of the Self
This public/private distinction between guilt and shame is a perhaps the most long-standing one, but it is not the whole story. There is at least one other important distinction to consider that complicates the picture considerably. It explains, for example, why shame can also arise in private situations.
Guilt and shame often differ in the relative role that the self plays in each.
Both guilt and shame involve some degree of negative self-evaluation, but with guilt, the self is usually not the central focus, whereas with shame the self is usually the central focus.
The politician feeling guilty says that he BETRAYED his wife.
The politician feeling shame says that HE betrayed his wife.
And so, even in a private situation, we can feel intense shame, if the self is strongly implicated by the wrongdoing (some psychologists call this "internal" shame to differentiate it from shame more directly caused by public exposure, or, "external" shame)
This distinction helps explain why shame is often a more aversive and intractable emotion than is guilt. It’s not fun to think oneself flawed, inferior, and defective, and the negative consequences of this view of the self can be huge.
This distinction also helps explains why shame, very much less than guilt, can be linked with a nonmoral, inferior attribute. We can feel ashamed because of a physical defect over which we have no control, but feel little guilt over it (precisely because of having no control). Furthermore, the public exposure of the defect heightens our shame, but not our guilt.
In sum, what is the difference between guilt and shame?
Guilt is the painful feeling of self-reproach resulting from a belief that one has done something wrong or immoral. It occurs regardless of whether others know about one's wrongdoing. Although guilt is linked with a negative self evaluation (after all, it is the self that has done something wrong), the central focus of the feeling, typically, is on the wrong behavior not on the bad self linked with the behavior.
Shame arises in at least two forms. "External" shame is the painful feeling of having lost the respect of others because of the improper behavior, incompetence, etc. of oneself or another. It is very much connected with the public exposure of one's wrongdoing (or, inferior attribute). External shame is associated with terms such as "disgraced" and "humiliated." External shame is probably the most familiar, traditional way we think about shame.
However, the second form of shame, or, "Internal" shame, is less dependent on public exposure. Indeed, internal shame speaks to the tendency for shame to be closely linked to a negative self evaluation, without regard to explicit public exposure. The central focus on internal shame is on a defective, flawed self and this perception drives the feeling.
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Webster’s new world dictionary (2nd ed.). (1982). New York: Simon & Schuster.