Political economy and statesmanship: Adam Smith and Alexander Hamilton on the foundation of the commercial republic

In this study, I compare Adam Smith and Alexander Hamilton on the subject of the foundation of the commercial republic. The immediate point of comparison is each man's view on the economic future of North America. Smith presented what is still, perhaps, the classic case for the free market, while Hamilton presented a powerful and enduring case for state intervention in the economy. A consideration of these arguments provides a valuable insight into the question of the economic role of the state. Furthermore, the comparison of Smith, a theoretician, and Hamilton, a practitioner, establishes a vantage point from which to consider the role of the social sciences in a liberal democracy.; I conclude that Smith's political economy was based on a reading of history which ascribed an exaggerated role to commerce. On this basis, Smith was led to believe that economic forces are spontaneous and manifest themselves in an orderly and socially useful way. It is arguable whether Smith's positivist successors have escaped his errors. Smith himself had little faith in "political arithmetic," the eighteenth century forerunner of today's quantitative economics. Hamilton had a keener awareness both of the complexities of political life and of the problems of abstraction. His understanding of the volatile forces which drive industrial and financial capitalism is closer to reality than Smith's neat deductive system. Moreover, his economic program blended an awareness of the benefits and limits of state intervention. In sum, Hamilton's moderation in theory and practice provides a better model for the liberal statesman in the realm of economic affairs.