Chapter 7: The Decline of Political Economy
7. The decline of political economy 7.1 Introduction If modern liberalism, the public philosophy of modern America, would be alien to the Founders’ imagination, the same is true of the economic theory to which modern liberalism is conjoined.1 I emphasize, in particular, the lack of correspondence between the Founders’ political economy (S1.7) and the economist’s theory of the state, social welfare theory (S5.2). Equally important, the economist’s consequence-based, procedurally detached and intendedly value-free enterprise is far removed from the work of the great Scottish moral and political philosopher, Adam Smith. This is significant, because Adam Smith is standardly characterized as the ‘father of economics’ (Tribe, 1999, p. 609), because economists are wont to associate social welfare theory’s first fundamental welfare theorem with Smith’s ‘invisible hand’ metaphor (Pindyck and Rubinfeld, 2005, p. 590), and because Smith’s work either influenced, or was congruent with, the Founders’ thinking. On the one hand, Smith, in the manner of Jefferson and Madison (SS1.2, 1.6 and 1.7), abhorred discriminatory policies intended to promote manufacturing, foreign trade or agricultural ‘species of industry’. Like the Founders, Smith’s rejection of discriminatory policies was animated, in part, by his two-person perspective (S1.5); in part, by his concern that self-interested factious behavior find no expression in public policy and, in part, by his cognizance of what Hayek would later call the ‘errors of constructivism’ (S2.1). On the other hand, if Smith, like the Founders, was concerned with the discriminatory impulse inherent in postconstitutional conflictual politics, his non-teleological ‘political œconomy’ – a ‘branch...
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