When most people think about the Founders and economics, two common myths arise. The first is that the Founders vehemently disagreed about economics and, therefore, reached no consensus on the subject. This contention is evident in Alexander Hamilton’s and Thomas Jefferson’s famous exchange about whether the American economy should consist of self-sufficient farming or a commercial empire of manufacturing. The second myth is that the Founders saw little or no role for government in the economy—that they embraced a purely laissez faire economic theory.
Thomas G. West puts an end to these two myths with his latest First Principles Essay The Economic Principles of America’s Founders: Property Rights, Free Markets, and Sound Money. Indeed, Jefferson and Hamilton vigorously disagreed on some economic issues, but they shared common principles regarding fundamental economic policy. Second, the Founders envisioned a vital role for government in the economy—not by relying on experts to regulate in fine detail the use of property and foster mass redistribution of wealth—but to establish and maintain the basic protections of the rule of law.
Despite spirited policy quarrels, West contends that the Founders maintained a “consensus on both principles and the main lines of economic policies and the main lines of economic policy that government should follow.” He highlights three main principles of the American Founder’s shared economic theory: private ownership, market freedom, and reliable money.
Private ownership relies on government to define who owns what through titles of deeds, to allow the owner to use that property, and to prevent others (including the government itself) from infringing upon the property. Market freedom means that “everyone must be free to sell anything to anyone at any time at any mutually agreeable price.” To that end, governments must enforce contracts, except under certain limited exceptions, and provide means of transportation that are available to all for the purposes of exchange. Reliable money is necessary to facilitate all of these transactions.
From these three principles of economics are derived several policy implications. For instance, government should encourage private ownership of property; should protect property from abuse by other people, foreign nations, and the government itself; and should prevent monopolies. Government also has some enumerated powers to restrict private property’s use, including promulgating local regulations for health, safety, and morals, and subjecting property to a limited degree of taxation.
Government today has strayed from the Founders’ economic theory, and several of the Founder’s policy implications are in tension with modern practice. For instance, federal regulators, such as the Environmental Protection Agency and the Fish and Wildlife Service, severely curtail private property’s use. Large portions of western states are designated as public land. Government does not encourage private ownership of this land, because government now is “presumed to know best how property is to be used.” The Founders’ understanding of government as protecting the people’s rights and their personal property has been supplanted with a government that confiscates or redistributes private property.
Despite ever encroaching government regulations, market freedom remains and modern statists have been unable to erase the American spirit of economic enterprise. As we see from the Founding generation, though, agreement on the basic tenants of economic theory does not preclude healthy, vigorous debate about particular policies. Fortunately, it looks like that debate may be moving is the direction of economic liberty.