Economists and the State

Economists and the State

What Went Wrong

Timothy P. Roth

Adam Smith is widely regarded as the ‘founder of modern economics’. The author shows, however, that Smith’s procedurally based, consequence-detached political economy, an approach shared by America’s Founders, finds no expression in the economist’s utilitarian, procedurally-detached theory of the state. This ‘wrong turn’ has meant that, if economists are ill-equipped to address an expanding federal enterprise in which utilitarian considerations trump the Smithian/Madisonian idea that means and ends must be morally and constitutionally constrained, they are also ineffectual bystanders as growing institutional skepticism, demands for ‘social justice’ and metastasizing rights claims threaten our self-governing republic.

Chapter 2: Institutions matter

Timothy P. Roth

Subjects: economics and finance, political economy, public choice theory, politics and public policy, political economy, public choice


2.1 ORDERED LIBERTY: THE FOUNDERS’ REPUBLICAN SELF-GOVERNMENT PROJECT Aware of their ‘English inheritance’, the ‘rights of Englishmen’, informed by the work of moral and political philosophers, aware of the failures of the Articles of Confederation, and sensitive to the tensions between the national and state governments, America’s Founders had a distinctive republican vision. They understood that Americans could keep their republic provided, first, that the Constitution’s formal institutional constraints on discriminatory ‘factious’ behavior would not be the ‘parchment barriers’ that Madison imagined the states’ Bills of Rights to be. But the Founders also understood that formal institutional constraints would not be enough. Emphasis was placed on the importance of informal institutional constraints; in particular, on civic engagement and civic virtue. Among other things, this required that political and, therefore, moral discourse be informed by political and moral philosophy, that political economy would be value-laden, and that postconstitutional statutory law would, like the Constitution, both reflect and promote respect for the moral law; for the equal treatment of morally equivalent persons. The Founders hoped, in other words, that postconstitutional, conflictual politics would be constrained by federalism, by the separation of powers, by the federal government’s enumerated powers, by the substantive and procedural rights codified in the Bill of Rights, and by the citizens’ ‘civic virtue’. Central to this construction is the notion that day-today politics would reflect a reciprocal relationship between citizens’ concern for the public good and the body of constitutional and statutory law. Citizens would, it was hoped, understand...

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