How does Las Vegas survive?
Remember the casino owner in Ocean's Eleven? He may or may not be a murderer but I don't think it's stretching the PHB description to call him evil. Even so, he's a respected member of the Las Vegas community in the movie and I'm quite certain that the town would side with him against any paladinbot who walked up to him, detected evil, and decided to smite him on the floor of his casino.
How about the ordinary Germans who supported the Nazi party in WWII? How about those who informed on their neighbors in order to avenge some petty slight or seize some perceived gain? Sounds evil to me. Yet they're neither murderers nor oppressors.
How about guards who are on the take? They imprison the innocent for personal gain and betray their duty by letting the guilty go free for gain as well. Evil? Sure sounds like it. (However the traditional punishment is lashes and expulsion from the guard as often as it is death).
How about the businessman who figures that polluting the water table with carcinogens isn't that big a deal? After all, it's not like he's (directly) killing anyone (right away).
How about the Baker from Sagiro's campaign who takes legal action to shut down the PCs' soup kitchen at any costs so that the poor people have to buy their food from him? Sounds evil to me.
How about Fagan from Oliver Twist?
How about Moliere's Tartuffe? There are plenty of cads like him in the world (though most are less successful).
How about the drunk who beats his wife? Sounds evil to me.
Evil is a lot more common and has a lot more common expressions than you seem to realize--even PHB evil. Evil also doesn't keep people from being nice. The casino owner in Ocean's Eleven was nice. King Louis from The Man in the Iron Mask is nice (at least to those of similar social standing). Plenty of Nazis--even SS members--were nice people who would have been fine company at a dinner party and were upstanding members of society. Being nice, presentable, or even a pillar of society doesn't prevent one from being evil.
Historically, most societies have recognized that fact and have attempted to structure themselves so that evil people find it in their best interest to support the society and act in ways that benefit it. And in that bargain, society has an interest in protecting its evil members as well as its good ones.
Geoff Watson said:
Have you guys read the alignment descriptions in the PHB?
Evil is not 'a bit dodgy', evil is for murderers and oppressors. Do your towns really have that many murderers, torturers, devil-worshippers, etc? How do the towns survive without wiping themselves out?
If the DM is having NPCs that detect as evil but aren't really evil, that's unfair on the paladin.
Just smiting evil on sight is dumb and reckless, but isn't cause for a paladin to lose her abilities.
Geoff.