Economic policy and the Founding fathers.

[Free Trade is managed by the invisible hand.]

The word capitalism did not appear until the 19th century, but it is pretty well understood that from colonial times until mid 19th century our economy was in the mercantilism/Merchant capitalist stage of production. Thus in some regards the economy was very different, but at the same time faced many of the same problems that countries have had to deal with for over 200 years since that time.

These problems were.
1. Defaulting
2. Inflation( just think about the great inflation period that lasted from the 14th to the 17th!)
3. Supply shortages(money)
4. Infrastructure
5. Economic bubbles.

All right so its obvious that there were many economic problems, and it is interesting to see how the founders or other individuals would often argue for economic policy. For example did they argue on the grounds of efficiency or constitutional requirements?

Here were some of those ideas.
1)progressive taxation was supported by thomas paine, and Jefferson.
... legislators cannot invent too many devices for subdividing property... Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise. Whenever there are in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right.
Thomas Jefferson (in a letter to James Madison), 1785

2) Central Banking was favored by hamilton.
3) Tariffs that would protect small industries from forgein competition.
4) Social security(national retirement fund) and estate tax's was an idea supported by Thomas Paine.

Probably the most influential book in economics at that time was the "Wealth of Nations", but only a few of our founders actually took interest in this book. Smith, wrote during a time period when "nails" were often considered more valuable than money. For example an individual would often burn down his entire house in order to collect the nails he needed in order to build a new one. So it is quite obvious that we have come a very far way,but it is interesting to notice that some of these economic ideas are very modern.