good afternoon, everybody. i'm yuval levin of the american enterprise institute and it's my pleasure to welcome you to a set of conversations about capitalism and the american founding. today's gathering is part of a large and ambitious project for

us here at aei. and i want to say just a few words about it before we get started. 20 26, two years from now, will mark the 250th anniversary of the american founding. a lot of organizations are going to find ways to recognize that milestone in a variety of ways. but in thinking through what kind of distinct contribution we might be able to make, in particular, we thought that we should produce something of a lasting intellectual product through a set of conferences that then will yield a set of books and educational materials. beyond that, explore how americans now should understand some of the key themes and questions at issue in our country's founding. those materials can outlast the anniversary, can serve educators and students and citizens for many years to come. and to do that, they'll draw on scholars from a variety of fields with a diversity of viewpoints to offer americans some wisdom about our civic and political inheritance. and so over the course of more than two years, we're hosting eight scholarly conferences here

at aei, each of which will be devoted to a particular facet of the character and legacy of the american revolution. the first of these was held late last year on the theme of democracy and the american revolution. today's is about capitalism or economics and the revolution. future conferences will look at the founding and the revolution through the lens of religion, of law, of equality, of global affairs and other subjects. each conference then will result in a book of essays on that subject, as well as all kinds of video and audio and digital media products. and the books will then be gathered into a collection to be published in time for the july 4th, 2026 anniversary and to be widely available as resource available to public libraries, to college and high school teachers and beyond. our goal really is to create something like a 21st century literature around the founding and to help inform and reinforce the growing movement, to strengthen civic education and civic learning in america. this is, as i said, the second

of those conferences and our aim today is to think about the founding and the american revolution through the lens of economics and of the market economy, which the united states quickly came to embody in theworld in the wake of the revolution 1776, the year that we mark as the beginning of our nation's life. the anniversary we're celebrating was also the year that adam smith published the wealth of nations, a book that came to be known as the definitive early account of the principles and character of the market economy. and so we are approaching the 250th anniversary of the declaration and of the wealth of nations, which may be a fortuitous coincidence or maybe as the marxists used to say, there's no such thing as a coincidence. and the two really are intertwined by much more than chance. we're going to think about that and we'll think about the economic dimensions of the american founding. with the help of five great scholars of the subject today from different fields. each of them looking at the question from a particular angle. each is producing an essay for a volume on this subject and so

we'll speak a little bit about the arguments of that piece, and then they will engage in conversation with each other and with all of you. we'll do that in two panels. the first will be moderated by my colleague adam white and will feature deirdre mccloskey chris thomas and richard epstein and the second moderated by me will feature clement forever. jay cost. we've dubbed our theme capitalism and the american revolution, and we do that in part because the term capitalism has become kind of provocative in our time. in fact, every single one of the panelists today, when i first approached them with this title, had one or another kind of concern about using the term capitalism in describing the subject we're taking up. and once that became clear to us, then we knew for sure that we had to use that term. capitalism defenders of the market economy, in a sense, are now often uneasy with that term because it might give the wrong idea about the nature or the organizing principles of our economic system.critics of the market economy very often now use capitalism as

something of an insult. we're using that term because we think that it might force everyone involved in these conversations to stop and define their terms a little, to think hard about just what we mean when we approach the american founding and its era through an economic lens precisely because it is contested. maybe it will keep us from assuming too much and force us to really get to the bottom of things. the american revolution plainly had some inescapable economic dimensions, and the nation it launched has been identified with the commercial economy and the market economy more or less from the beginning. that gives us a lot to talk about and think about, and so we'll get started doing that. the first panel, as i said, will be moderated by my colleague adam white. adam is a senior fellow here at aei, a leading scholar of the law and constitutionalism with a particular focus on administrative law on the supreme court, the separation of powers, the foundations, really of american republicanism. he's co-directing this project to mark the 250th anniversary the founding, along with our colleague john yoo and myself.

and he will introduce the first session and get us going. so, adam floor is yours. thank you, yuval. thanks, everybody, for joining us today. and thanks especially to our speakers for this first conversation on commerce and the founding. now, about a decade after the american revolution began, john as americans began to deliberate on a new constitution, commerce was, of course, a central theme. and interstate commerce was a significant reason for bringing about the new constitution. but, of course, at the beginning of it all, the declaration of independence itself and the debates leading up to it. commerce was a significant part of the conversation. the reasons for or maybe the rhetoric around the american revolution in the first panel, we're so lucky to be joined by three speakers will explore a different theme, different aspects of this theme. and i'll try to ask a few questions. connecting commerce in the founding era to to politics, to the markets, and to

statesmanship. i suppose somebody has to point out the irony of today's conversation happening on tax day. but of course, for the new englanders in the room, i want to especially wish them a very happy patriots day. maybe that's a more positive way to start this conversation. i'll introduce each of our three speakers in reverse order from how they're going to give their opening statements. richard epstein is the lawrence, a tisch professor of lawlecturer at the university of chicago and a senior fellow at stanford's hoover institution. his countless writings include simple rules for a complex world and the classical liberal constitution. before him, we'll hear from professor deirdre she holds the cato institute's isaiah berlin, chair of liberal thought. she's a distinguished professor emerita of economics and of history at the university of illinois at chicago. her myriad books include the bourgeois virtues, ethics for an age of commerce and i think most recently why liberalism works.

how true liberal values produce a freer, more equal, prosperous ' is the heritage foundation's distinguished fellow in american thought and heritage's b, kenneth simon center for american studies. but in this building, we think of him first and foremost as president of aei from 1986 to 2008, following his public service in the reagan and nixon administrations. every day on my way into the building, i turn and i see chris. the statue of chris smile at me as i walk in. chris, it's nice to see you in person so why don't you go first? thank you. thank you. you've all. it is easy to see in the events of the american revolution and found in the birth of a nation of free market capital.

listen. the resistance to the british navigation acts and other trade restrictions, the constitu economic turmoil of the articles of confederation. the constitution's protections of property and contract the fledgling government's bold funding of war debts and establishment of a national bank. it is important to recognize, however, that these were matters of intense controversy. hamilton's debt and banking proposals were bitterly contested and enacted narrowly with a fair amount of political subterfuge. federalists and democratic republicans differed vehemently on federal and state roles in economic policy, crony capitalism, making sport of property and contract act, and many anti-market nostrums were prevalent in the state legislatures before and after the constitution. the founders were in broad

ag rights and private property, but disagreed sharply on the application of those principles to practical questions. the remarkable thing is that so many hotly debated issues were decided in ways that further a productive economic order. that is the fundamental question of the rise of american capitalism. quotations from the declaration. the constitution, the federalist and convention diaries can illuminate this çquestion but cannot answer it. for this, i recommend our colonial heritage, which was the source of the founders words and deeds and of our ensuing prosperity. my answer is that the colonial and founding periods established an order of competitive pluralism. i use this coinage to distinguish from the liberal pluralism that is often said to be the essence of american nationhood. a mosaic of cultures, religions ethnicities, peacefully

coexisting in a spirit of mutual respect, or at least toleration. competitive pluralism sees this diversity differently as a dynamic, disparate institutions, traditions and associations, competing for adherents, prestige and prerogatives. liberal elements is a feature of american pluralism, but the defining feature is energetic. a association building and promoting and proselytizing on behalf of matters, moral and practical, personal and political. competitive pluralism has been a critical source of vitality in american culture, science and religion enshrined in the first amendment. it is also been the organizing principle of our politics, government and commerce in politics and government. institutions compete for votes jurisdiction and power in commerce. institutions compete for resources.

customers and profits. the two orders have a common provenance. the founders disagreed about many things, but they were all suspicious of power and wary of its corruptions. their hostility was born of experience with british monarchs aristocrats and ministers, and with their traitorous frictions and business. business monopolies, among other things. for many of them immediate experience was reinforced by study of ancient history and modern philosophers from montesquieu to adam smith. that's not the whole story. many founders were also suspicious of political democracy and comfortable with hierarchy and meritocracy. but the british settlement of the eastern seaboard and western frontier had been localized, culturally diverse and entrepreneurial, led by pioneers who were accustomed to freedom of action and jealous of their prerogatives. when the time arrived for

construct a national constitution, america was an adventitious regime of multiple self-made sources of authority. they had to be accommodated in some way. the entrenched interests pushed for decentralized nation rather than, as in britain centralization. these circumstances produced a strong bias for the first thought disrsed, fragmented power in both government and commerce. my thesis is that a competitive political order permitted men of commercial temperament to establish an economic order of competitive capitalism. here is a broad brush summary. first, in the colonial period old world culture and new world circumstances laid the groundwork for the institute lutyens erected at the founding. the settlers were adventure ers seeking a new life in a faraway land, beginning with a perilous ocean voyage, followed by

daunting uncertainties and challenges. tocqueville's 1835 assessment was nature and circumstances have made the inhabitant of the united states an audacious man. that of historian carl douglas in 1951 was capital. lisbon came in the first ships. many settlers were religious refugees, but their leaders were necessarily self-rule and practical. the william penn, came from wealthy. welcome to british families and became enthusiastic colonial developers. they and many denominational start ups made copies. edition the defining feature of american religion. tocqueville thought religion was a prime example of our gift for voluntary association. americans, he said, so completely confused. christiane, city and freedom that it is almost impossible to have them conceive of the one without the other. the colonies were either joint

stock companies owned by private investors or royal land grants to favored individuals private for profit colonization reflected english political traditions and in the 1600s, the rise of the bourgeoisie and the distress in circumstances of monarchs and ministers through decades of war and revolution. in contrast, the spanish came as conquest stories of the government. the french as trappers and merchants who were agents of the crown with no political rights of their own. the colonies were rich in resources, but starved for goods and credit and isolated by a mighty ocean. seaborne commerce required capital investment. reliable connections and foreign ports, and astute management of the enormous risks of ocean transport. this led to the rise of the businessmen in new england. merchants became influential personages equally and

eventually supplanting the puritan gentlemen and church leader colonial government. the merchants ignored the mother country's mercantilist export and shipping restrictions until london finally got its act together and clamped down. after 1707, paving the way eventually to revolution in the meantime, the merchants were facing complex commercial voyages with multiple perils. they hit on the idea of trading risk as a commodity separate from the physical commodities being transported and subject to estimation valuation and market exchange. that was the capitalist invention of insurance. conception of freedom as self-ownership. if the future could be reckoned with rather than passively accepted as implacable fate, then the individual could take response ability for his own lives course including eventually the slaves aboard many of those ships.

the colonists most consequence to innovation was converting the land from aerostat from aristocratic endowment to democratic capital. the settlers made ready use of america's most abundant resource, often by squatting which was illegal in britain but natural and hard to police in the vast territory. in fits and starts colonial legislator legislatures promoted widespread land ownership, ship and circulation through public recording of deeds and mortgages by liberalizing creditors remedies against the debtors land. they lowered interest rates and made land routine secured for commercial investments. and every day transactions. joseph's story would write that colonial legal reforms made land a substitute for money. on the eve of the revolution per capita income in the british colonies was higher than in

britain and europe and much higher than in spain and portugal. and france's colonies. americans were 2 to 3 inches taller than european was in the northern colonies. more than 70% of families owned their own land. population was surging thanks to highration and high fertility. second, the actions and institutions of the founding period were products of the enterprising self-governing, decentralized society that settler culture and circumstances had given rise to. most of the signers of the declaration, int tution were men of commerce, merchants and farmers. shippers and shopkeepers, land developers and speculators. they were much more liberal and practical than those who read most revolutions leisured, nobles and clergy inflamed intellectuals, disgruntled with military officers in contemporary paris. the members of the committee on

public safety had no experience in the world of commerce and exchange. the constitution did not establish a policy direction for the new nation. but instead a political structure in which policy would be determined by institutional competition. separation of powers was a republican adaptation of british and european forms, but also drew on commercial experience. as madison wrote in federalist 51. the policy of supply going by opposite and rival interests. the defect of better motives might be traced through the whole system of human affairs. private as well as public. i had to quote the federalist at some point. so there it goes. separation of powers was intended not only to police corruption, however, but also promote division of labor in the three distinctive government functions. hamilton's genius debt assumption and banking schemes were an immediate vindication of

executive specialization. they would never have been adopted by a legislative government and were key to business confidence and economic growth in the new republic. executive congressional rivalry did not by any means always produce good economic policy but checks and balances limited the supply of policy of all kinds. cumbersome government gave a wide berth to energy in the private executive's. strong federalism, with several semi sovereign states was a colonial fait accompli to the despair of madison washington, franklin hamilton and others. it turned out to be the constitution's most important economic. states seized the leadership of national economic development and displayed great capacities for promotion and risk taking, leading often to bankruptcy. when jackson abolished the national bank, the states lacked state banks leapt into the breach.

the course of empire was for the national government to acquire and distribute the territory through the states, to build the interest structure and small landowners and businesses to develop the economy. the founders accidental federalism was a regime of competition among states for citizens, businesses and investments. early results were the widespread abolition of primary ed and entail further democratizing theand and the chartering of hundreds and then thousands of new fangled limited liability corporations that had hardly existed before. state articles of incorporation were usually for specific owners and purposes, which promoted rent seeking and corruption. here, indiana was the big innovator. amending its constitution in 1851 to require that quote all laws shall be general and of uniform application.

third, and very briefly in conclusion. beginning in the 20th century, modern technology and culture have eroded competitive pluralism in economic affairs. the national executive has acquired tremendous centralized power and even lands ownership having given away or sold most of the land. in the 19th century, it now sequesters nearly 30% of the nation's land and more than 90% of the western states. private enterprise and government have joined forces through highly articulated laws regulations and taxes and through many nonpublic arrangements and real time mutual surveillance. much of the contemporary criticism of american capitalism from both right and left is aimed not at capitalism per se but rather at political capitalism. the consolidation of state coercion and private profit seeking, restoring institutional

or competition within government and between government and private enterprise is a cynical mention of improving the productive, the productivity and the reputation of american capitalism. thanks for next, we'll hear from professor mccloskey and should hear over here while she's making her way to the podium. i'll just remind folks that, of course, a lot of time for questions later on in the conversation. and for those who are watching live online, you can submit your questions either two ways, either on twitter or by email. information for both is on the events web page. thank you, dear. i have a speech defect. it's a free country, so if you can't stand it, you can run screaming from the room every glorious fourth i read out loud the declaration of independence. it' splendid document.

i, i urge you to it adopt this. it's in spirit. it could. custom but as an economist and his economist and his dorian, i'm sorry to report that the declaration of independence is not altogether god's own truth. what's its core truth? wrote, in honor of slaves. is it all men and women? there are created equal? but the economic claims in the declaration of independence and the implied course of the american revolution and it's

seeking hammock. it's economic consequences. again implied by the death declaration. if king george will just stop his evil acts, we will be rich and free, are not historically supported. in the first place. the declaration claims. in detail that the cause of the america revolution was the tyrannical behavior of good, of. george and third in parliament and in person particular for my purposes as an economic history historian, it claims that the economic effects of being a part of the british empire in the way

that they at large took colonies were by sharp contrast with say, england in jamaica was to impoverish the poor colonials. it's been shown by economic history historians that as economists who are historians, but also by historians who are historians that this was not true. but in fact, the. colonials or taxed notably less than these innocents of the home country, and that the long standing navigation acts, which

dated indeed from the from the 16, 16 hicks days when the english enemy was holland, were not large causes of economic distress in the new world. so as as a cause economics contrary my earlier in carnation as a college marxist. you economic causes were not so interested to the. to the to the causes of the america revolution or they weren't at least in a way that's become familiar to us in the age of trump.

they weren't, at least in their objective character, their were small. these impositions these two tyrannical economic impositions. but the beliefs about them and the claims about them and the agitation about them in the 1760s and and. 1770s were real enough cause of the american revolution. they created three parties, such as we have now in 2024, socalled patriots or whig whig part to.

wealth, their lives and their states, its sacred honor to what amounted to treason against the crown, and on the hand, another third of small population, free population who were to tories, some of whom not a large share actually, but some of whom fled when the who the the who fled? who fled the country after. 1783. and as is always the case a large third in the middle, third we've come to call independence. the purpose of the declaration of course, was to try to persuade the independence to get more of them to join the patriot

cause. now what then was the economic effect of the war itself? it was disastrous. the war was bloodier per capita than the say that than than the than. this second of america's two civil wars. a higher percentage of american colonists and both sides died in the struggle. and it was economically as wars tend to be a catastrophe. there's a of a queasy keynesian view that wars are good for commerce. well, the hell they're it turns

out that killing people and raping women women and burning houses and blockading ports is not good for business. so the narrow velvet victory after. sir eric togo, which brought the french in and the final battle, it's interesting to note that there were as many french soldiers at the batt native americans or americans and then the slow negotiation is really a piece. it was a close thing. it could have gone the other way, had the british not felt it

was a existential threat and if the french, if the benjamin franklin had not been so eloquent in his clothing especially his coonskin cap, so it a close thing and a bad thing, war is hell. as someone said about the sick second american civil war. so how about then the economic consequences after the war after 1783? well, as we've heard, the concern adoration was not a striking economic success. states could still erect tariff barriers among themselves, as by the way, is still true in india. now.

and though there were accomplishments, economic accomplishments, one of the great accomplishment of 1780s before our constitution was the northwest ordinance which for the enormous block of land of north of the ohio, south of canada, east of the. mississippi, that the british you know, somewhat a strange act of not paying attention handed over to the colonists, perhaps because they thought that the indians would give them so much trouble that it wouldn't be or wouldn't be worth. was important economically in the long run but in the short,

even that great acquisition and even the. the even greater acquisition of the new orleans purchase. and then this one pleasant business the 1840s of stealing half of mexico to supplement it all that was not important in. the 2030 even 40 years after the declaration of independence that period up to around. 1818 ten perhaps because after all there was another war with britain. in 1812, which had very bad effects. and what should and i don't mean george washington, i mean this

place. had it killed it in the cradle. that would have been a good idea. but it didn't. economic growth in the united states. was zero or negative. the the figures are indistinct, of course, but economic historians have concluded that it was not the was a good idea to break from the the british empire, and to be indeed in some ways hostile to british economic affairs. it was it was a bad period period. colleagues of mine in economic ued that american economic growth in the 19th century it would have been much faster earlier had.

well, now let's see, what's the counterfactual? had the united states stayed in the empire, had the revolution not happened, if we had become canada, so to speak because in making these assessments economic or political or social, you always need to consider the counter factual. what would have been the case? what were the realistic alternatives? i think and i think the case is quite strong economically that staying in the empire would have been the course of the wisdom. and indeed, ben franklin believed so until very late. he worked tirelessly in pennsylvania and in in london to

try to persuade people to cool their tempers and trouble both sides. they. colonials and the imperium to reach a sensible agreement. there. there's not much case to be made that thed states was made greatly better off than, say canada by being outside of the empire in such a way. but there is one respect in it for, for example, the romans, the grave matter of slavery would, i think, have been solved. you in a much more sensible than a great civil war. if we had continued to be part

of a slowly. liberalizing move, the uk after 1833 in the british empire, slaves were emancipated with confidence safely to to the owners, a proposal that was made by moderate abolitionists, the united states, and flatly by the slave owners among whom was our friend thomas jefferson. in. six 1885 richard rumbold a radical, egalitarian in england was hanged in edinburgh in and

as he was permitted to do so under english law, he couldn't gi his his scaffold and did it in the he said to, i'm sure the amusement of the crowd gathered to see the see the entertainment more entertaining even than than c-span. he said, i think that no man born of god above another. for nothing comes into the world of the saddle in his back, nor any booted and spurred to ride him. now, in the last letter that thomas jefferson wrote, turning down an invitation to travel to

watch england to give a speech two weeks before he died, he quoted this very sentence without attributing the issue. he was that the phrase was quite well known that he assumed perhaps that is of correspondent would know that it was this great englishman. that was perhaps the lasting consequence as economic, political and social of the american revolution. i'm just now read a reading and democracy in america, which is good thing to do. and he says, of course that it's equality that was the key. the peculiarity of our country

i think it's not the equality of outcomes such as socialism recommends or the equality of opportunity that are our friends, that some of our friends think they can achieve. but equality of permission, the kind of permission that you are speaking of that had grown up in the scene. these have been teens in 18th century and thesehores. it's that idea that was important to about the declaration the war, the outcome. it's that idea that all eventually even people of good color the colonial women queers and the rest were to liberated

in motto in the seal of the american academy of arts and science says it said says so liberate it, tap to flaunt under you of liberty. they flourished. they flourished and they eventually did. but it didn't require a revolution. thank you. let's return to coming to address. i'm trying to imagine in this alternate history we'd have to rebrand this whole place instead of it would be the empire enterprise institute. well, i mean listen to speeches that are rather lofty and lawyers always have the duty to be more prosaic on the ground. and i will try to keep to that

tradition while being informative. let me first make a couple of general statements about the situation. i think that there can be too much pessimism for too much optimism by chris. and the question is how you find some kind of immediate position. i think the first thing that we have to say about the colony peri is statements are true that wealth was higher and that phy health was greater and people were told it couldn't have been all that bad under british rule. and i think the point that david made that relative speaking compared to the home where the colonies were relatively likely taxed, were in fact probably the case on the way in which these things were done. and so there's always a little bit of the tory in me notwithstanding and in the way in which everything went for a lawyer. however, if you're trying to figure out what's going on, you have to turn the lens down, have to change the focus a bit. and there's very little legal development in the colonial

period. indeed, before the establishment of the united states supreme court, which was of course, a feature not of the articles of confederation, which had no judicial or branch, but only of the federal constitution, which created article three courts with exceptional power including the united states supreme court. so when i try to talk about the founding period from a legal perspective, you don't spend much of your time prior to 1787 and you the founding period as going through the initial justices and through the period of john marshall. and the question is, how do you want to evaluate this? and the first point takes off from what you've all is that nobody at the period ever themselves capitalist it wasn't that it was a dirty term at that time. it wasn't a term at all. a capitalism essentially is a term that comes in in the mid 19th century was introduced largely for negative purposes to explain why it is that socialism was serious, more superior. and you have to remember what it

means. it meant the government ownership of all productive of production was that and whatever the united states economy was it certainly wasn't that because there were very different traditions about private property and the way things were all. so the question then is if you're not talking about the great movements of the 19th century having to do with the railroads and regulated industries and so forth, what you do is you think of capitalism in the late 18th and early 19th centric as being part of a commercial republic in which manufacture was not the dominantobviously important. but there were sorts of things having to do with the way in which competition and trade would start to take place and so when i wrote my particular contribue to this volume, what i did is i started to look only at the federal decisions, largely in the united states supreme court, to get some measure of the extent to which we can say. this was a commercial republic. well, what is ained quite correctly

by chris the muse. it's one in which competitive decentralized forces are going to be able to work themselves out so that no competitor can use force to block somebody else from entering into a market. and taking his particular customers away by offering their goods lower prices and the antithesis. this turns out to be a form of protectionism in which those incumbents can in fact, impose some kind of restrictions on the way in which other people seek to enter these kinds of markets so as to hobble them in particular fashion and the way in which you try to figure out what is or is not a good company is to figure out what the ratio is between competition. on theonism on the other. and when you're doing this, it's already a very sophisticated because you think back to the way in which the spanish and the french operated. that was not even an issue that you had to worry about. it was simply slave ownership, domination, expropriation of one kind or another. and compared to those particular

horrors, a protected monopoly is a sign of virtue, rather than the sign advice. but compared to the aspirations set we have in this country, competition is going to dominate monopoly in a way that starts very early on in english history and goes all the way through the rise of the antitrust laws in the late 19th and early 20th century. so if you start to look at the ledger and the way in which this thing begins, it turns out that we really have a very mixed history on the relationship between the two things. chris was right to point out that our friend madison that son hamilton and the way in which he consolidated the natural debt, national debt, organized the bank, at least in the early round, was a way to rationalize of the wretched finances that had come out of the huge debts that were incurred in the revolutionary war. but then if you start to look a little bit further, the jacksonian critique of the first bank as essentially a monopoly institution, that's a basically stopped everybody else from doing anything. an independent base had a lot of

power associated with this operation, and it wasn't a bad thing, but it's probably a good thing when multiple state banks screw up after the veto of the second bank in the 1830s. if you lookarli of the most striking features of the federalist paper is the stuff in federalist number 11 where hamilton again starts to advocate a protection monism is a dominant policy in terms of our relationship to our european people, he said. it would be just a terrible thing to. have states in competition with one another. what we have to do is to remain a united front. and there's only one purpose to have the united front, which is to raise tariffs, which in fact will have very negative conflict, which is on the economy, when david ricardo wrote about this somewhat later he made a very powerful point. you raise tariffs. it turns out the demands that you have for their goods are going to go down and whatever you hope to gain by the tariff you're going to lose by the shifts in the relative values of currency so that it will make it more difficult for you to export goods. so there's no strategy of

protection which doesn't lead to dual ruin, and that is still the basic condition today. but there was at no point a serious move to abolish the tariffs. and when you start to think about some of the causes associated with the civil war the differential impact on tariffs between northern and southern dominant course. slightly, surely was, but was one of these things which in fact really had the same kind of operation starting to look in other places and, you see the same kind of equivalent history both ways, getting to very troublesome. and so we mentioned commerce and one of the dominant provisions of the united states constitution is the commerce clause. and i will now read it aloud to you. congress shall make no shall have the power to regulate commerce with foreign nations. among the several states and with the indian tribes. you start to look at the piece in the middle was the one which was least well formed and understood commerce amongst the

several states and the ability to regulate commerce with foreign nations was probably a hamiltonian device to make sure that you could impose the kinds of tariffs that you wanted to do it. when you start getting on to the domestic front, the key question is, can you form some kind of united market inside the united states or are you going to allow tariff barriers between states to break you up? and it turns out the american solution is very much similar to that of the eu today. they have protection against foreign competition and they try to open up exchange within the borders and that's exactly the way the early american history started to go. so that if you look, for example, at the first and greatest case dealing with the commerce claus gibbon's and ogden. and it was decidedly 1820s. and th question in that particular case was whether you could take a boat fr new jersey, into new york city, or did you have to be exclusive unless you could get a license to go in new york state?

waters from the heirs of the successes in title from fail who was given the exclusive right as an inducement to develop the steamship. now you cannot think of a worse policy than giving people territor monopolies to do things if you want to give them a subsidy, it's only cash that does it. and in this particular case, it turns out this is not a patent that they were claiming, but the right to exclude everybody else. and it would mean that the commerce would be balkanized. so marshall, who's very key to that particular situation, says, when we talk about commerce, we talk about something that extends into the interior, the state by way of navigation. this is not an elaborate embellishment. this was, in fact, the law of issues that time in an earlier case called and in 1816, chancellor kant, who is one of the greatest jurors of the first half of the century, basically said commerce power under the federal government allows them to establish tolls. stations at the borders and to police the citizens. they go from one side of the border to the other side of the border, but cannot follow those particular ships into the interior of the state, which

means there was nothing whatsoever that you can do to open these states up and prevent balkanization on these grounds. and what marshall did is effectively overcame that. and the great unresolved problem within that particular system was whether we had the commerce clause. but no particular piece of legislation is the mere existence of federal power sufficient to prevent the states from doing all sorts of terrible things and i think in the end, that position essentially take place. and so as you fast forward, it turn commerce clause was the strongest source of competitiveness between states in a world in which congress was just supposed to do something about this, never did anything about it at all. so that essentially this solution carried the day and created computer session. but the statute itself, a chameleon, as was the situate with respect to gibbons and ogden, because there's still the coastal trade. and one of the things that marshall said in this case is the united states would control the coastal trade, which means

that it can now impose at the federal level various kinds of monopolies on the kinds of ships that can travel in this. and if you start to think about what's a modern illustration of that it's the jones act, which essentially says that boats in the united states have to have u.s. licenses in order to essentially engage in commerce. so you do you see the same opinion having a very strong set of impulses associated with protection of competition and at the same time imposing a kind of protectionist elite that puts side. and this was essentially the way in which virtually every major doctrine started to work. so to give you another kind of example with respect this, what are we supposed to do with the contracts clause contract shall make no or no states shall make any law impairing the obligation of contract. it's very delphic and it has some very good uses. and it turns out it also had some very bad uses in terms of the way in which it ran. so one of the great problems in the period is there was no generalized protection for

economic freedom in the federal constitution, which would apply to stopping states from dominating it. and it's very clear that under the original design of and enumerated federal powers, the vast bulk of the so-called police powers stuff had to go with the states. and that, of course, meant that you could have highly productive legislation on the one hand. but you could also get highly protectionist legislation on the other hand. and the question was there anything that you can do about this? and in one of the most instructive cases have to ask is when you look at the contract scores, what does it protect? only existing contract or does it protect the right to contract in some future generation? and this issue became very important in the united states in one case, existing contracts were protected. and then they were overprotected because the way in which shields and council the case from 1819 wrote the particular provision if the contract was protected you could not discharge it in bankruptcy, which is absolutely a ruinous set of rules.

and you make a doctrine absolute when in fact, like all constitutional doctrines and it's a very important topic to do, it has to be subject to a general set of qualifying terms having to do with the police power and just comp sation, the first of which is not written the constitution and the second of which is not written into the commerce clause or the contract scores, and you have to get them both there. so if you can't discharge these contracts, bankruptcy, it's just a tremendous difficulty for the way in which you're going to reorganize society because there's no effective way in which assets committed to failed enterprises can be redeveloped to, push to something else and that was ouroofriend marshall being too in the protection of contract. on the other side, there's a great case ogden and saunders, in which the issue is whether or not the contracts at any prospective application. and if you do this, the question is what does it require? tell me when i should be done. i will just push. okay, so what happens is the reason why it turned out that

marshall and story together were in dissent was they could not answer the question. if you make this course prospective and you don't allow any interference with contract you can't have a statute of frauds and you can't have a licensing system. both of these things are utterly indispensable for commerce, particularly in a trade which is talking about the sale of long term viable assets. the system dies. if the only thing you have an oral promise and what he could not explain is why you need why was because one of the great problems in construing a doctrine is to figure out what terms have to be implied in the document as a function of natural law or theory. this is widely derided today and most modern circles. but omebody who cut his first on roman law and medieval law, the entire system of law always with this. and one of the conditions that you had was it was always permissible to introduce various kinds of forms that would increase the security of transactions as these things did.

so that everybody's better off in a ferocious than they were before. even if you're not allowed to impose things like minimum wage laws which are going to restrict contractual opportunities. so formalities have become a very powerful exception. if marshall and storey had put that point front and center, they have saved the hythetic say that the only thing that we're going to strike now are partizan rent seeking like of the sort that is fairly they missed all of that particular point and so what happens again is you have insufficient power to control contract where in fact they become sufficient, highly disruptive that you cannot figure out how to end them. on the one hand or to protect them on the other hand. this is not the great stuff in the last case. i'll just give you by way an illustration has to do with government one. just real briefly, there's very briefly, i'll just mention one thing. i changed my last bit. one of the things that really is an extreme advantage in the united state is development of a patent system. they had one in england, but the english system was so artificial, so contrived, so

expensive that anybody did a serious history of the growth of english law and english industrialism. the late 17th, 18th century and so forth. so the patents would have a relatively small part to play in it because you couldn't get one come to the american system. and jefferson said, no, we have democratic patent system low entry fees. we're going to have a professionalized off going to encourage them. and so patents have a much larger place to play in the united states system than it did in the british and in the brit system. they were both protective of property rights, but exclusive a rival property rights coming in the in the american system it tended to be more pro productive than it did elsewhere. so it's a very mixed position but compared to any other system on the face of the world, all blemishes were relative small, which is why productivity in fact is very good on a comparative measure. but why at the same time as against an idealized version there are a number of false steps. i think. fair to say that there were numerous and important, but as a

percentage of the economy taken by the relatively small chris the moose ended on his dower. the sky above these particular protections as we get into the 20th century gets very one proposition. the federal has the right to choose whether we want or monopoly and all. and that proposition which was sanctified in the new deal as a counter for the subsequent decline in the economic vitality of the united states. thank you. thank. i only want to. so needl say, i will give both chris and richard an opportunity before we finish to respond to the address proposal that we would have been better off british. and i'll give you the last word, deirdre, but we'll save that for a moment. i want to pick up a couple of threads that i saw in both chris's and deirdre's remarks. chris when you discussed the early american history as an of

commerce, the founding generation were men of commerce, successful men of commerce. and if i remember correctly in the notes you shared with me ahead of time, you took care to point out that early american commerce, the transatlantic trade required required real capital, required businesses real size and magnitude. so you touch on both commerce among sort of we call them maybe ordinary americans shop and farmers and so on, but also the kind of large enterprises that are george washington, other great statesmen founded and administered. i guess my point your remarks point to both the importance of commerce in shaping an all americans and also the role of commerce in shaping american statesmen. and i'd love to hear more about how you think that both of those dynamics into the american founding. you said something that stood out to me. you said the real effects of commerce for small in the founding butie bel were enough causes

of the founding. and is it fair to me to add maybe beliefs in the habits of or give rise to that? i'd love to hear further word of that in a similar vein, both in terms of speaking just to sort of americans across the board was it did have a unique on the men who signed the declaration of independence even more so than the rest of americans. they were trying to persuade. i'd love to hear more about that. and then i'll give richard the final word. so we'll start with with chris. chris commerce and, all americans. commerce american statesmen. is one of those more important than the other perhaps. the if you get into it, there's an enormous literature their entire devoted to the question you have raised. and there are people have made their career saying, you know, throughout the 1600s and 1700s most americans were just kind of

farmers. they were living on the farm. they made their own furniture. they raised their own crops, and they most of the crops themselves or part of them with their neighbors, there wasn't much of a commercial society. gordon wood, who spoke the first of your sessions subject and came down on the side of commerce that even the simple remote farmers were dependent on trade for for many things and that that the spirit of was was very alive but in any event, a commercial grow up in the especially along the ports and harbors and and coasts and became a very part important part of america. the john winthrop and the puritans, they wanted to have a theological league governed,

self-sufficient nation up in new england. and very early on they, they, they invested in some man, some iron or manufacturing facilities complete disaster. and it was clear very early on in the 1600s that america was going to be an extract of an agricultural society. so there are going to be many people involved in the economy who are not people of commerce, but they depended on people of commerce because so much that they required had come from abroad and those people of commerce ended up as in many societies important political figures, they rose they rose. and in government of they when the revolution came along henry knox these, a bookseller. and so he kind of goes into logistics and he turns out he' really really good at it. and you have lots and lots of practical people, many of them

very small businessmen that are form an army, a founding generation, that that is quite unique. so i'm glad you say that word practical. that's the word i was looking for, because on the one hand, we can think of the founding era spirit of enterprise as the spirit of liberty. maybe the founding generation, a bitbout what they might achieve or what they're entitled to. but i think it's the side of things that these were not practical men of commerce that perhaps made them uniquely well-suited to found a country to win a revolution. what was the that was the revolution of sober expectations. 50 years ago, usa out of aei maybe there their commercial experience made them uniquely, uniquely well suited for this. but let me give theodorou a chance. say, i think that is your read your question to chris and his

answer are very similar. have a very have have a three in common that ideas matter and that if the cato institute or the have any point it's to say it's to encourage the root the growth of ideas. i. george would george will's my i think it's his last book of it's i'm not sure what's called the conservatives and something like that and he he he speaks in favor of the force of ideas in history institutions as well. it matter that that the south slavery in the north eventually although it well after the

revolution that it was completed did not have have slavery. so it's it's this it's this commercial idea. that's why i think that adam smith is so important he wrote he has the wealth of nations one of two great books. the other one you also want to read. it's right what was was published a few months before theindependence. and in the long run, it may have mattered more. the declaration of independence, big the polite commercial people as as blackstone called the

british in the in in the 18th century, had more radical american impossible to run us and paralyzed empire with any socialist. ambitions of the 18th century because of too far away. so we grew up with equal the of permission and in commerce especially. one further historical point there is a trade addition, a strong belief by my friends and the leftist historians on the left that indeed these. embattled free farmers who shot their the far fired the shot

heard around the world or. were operating in corporate communities that they weren't capitalists. and this is a strong theme in american on the left and it's it's it's it's i don't care what you think it's been it's not good like i see richard dying to john i'll jump in talking about the commercial republic again. i'm going to do a slightly different fashion if start going back and trying to figure out the sophistication of commercial arrangements starting at the roman law period and going forward, it's essentially incredibly sophisticated on all of these transactions there was certainly was a slave trade

actually, or slave work even that was very sophisticated with control. but international sales transactions, for example, were extremely high in the period of the republic, and they started to decline in the period of the empire because essentially the hand of government started to come in and contract the business this was mainly through personal and so forth. what happens is you don't get really elaborate transactions in, real estate until you get a recording system because before that the only thing you would create is a first mortgage and a thing because you had to buy the papers up. but you can't create other kinds of liens. second mortgages and the more complicated things but all by the time you get to the revolutionary period, all of these have been more or less sorted out. and then if you're trying to figure out the exemplar of a trade, it was the rise, the bill of exchange, which took before that period in which the first time you could transform money without transferring money by transfer being a warehouse

receipt, which gave you a right to draw on that money, which enormous expanded things. and this was very much in evidence in the united states, a large amount of the early legal cases like swift and tyson. we're to sure that you had an international universal law for bills of exchange.so would not be blocked by state animosities and border conditions and all of this, in fact. true. so this part of the system is enormously pro-competitive and it remains so much to this current day. the ideology was fine. it was consistent with this. but you know, somebody else, if you don't have an ideology but it turns out, you have these incredibly efficient systems for dealing with contracts and for dealing with exchange mechanism. what happened is the fact that most people are farmers or slaves in some sense doesn't detract from the fact that the larger economy depends on this. just to give you a one last illustration, very large numbers of the provisions that are contained in the magna are in fact devoted, to the question of how you prefer and organize as free trade elsewhere, there is

probably a slightly large just stuff of dealing with the question of how you organize tenancies and succession but the reasont's happened in part is you know, dicey times with bad king john and so forth. if you're trying to get a royal group to control things, getting the alliance, the commercial classes in england was not a bad thing. and th alliance started to last for a very long time. so think that the correct description of the situation is one that doesn't count the number people in commerce, but the importance commercial institutions on the overall characteristic and organization of the country. let me ask one more though i. just want to quarrel with my dear friend here on the grounds of, the economic history there were. bills of exchange in ancient. mesopotamia. well, but not 2000 years. because you're talking about.

well, it depends on what you mean by. yeah, okay. i agree. they weren't there was not a big secondary market in them, etc., etc., etc. but there were ways of transferring money. nobody's in that. and and in an interesting way the ideology of what we now call the near east was anciently pro market. look, hold on. no, this is not rome at 2500. so on. i'm sorry, one more moment, because richard, i'm gonna give you the first. the first. the first answer to this one last question, and then i'm gonna turn it over to the audience, because you were just speaking a moment ago to the importance of the law. yes. in in supporting early american commerce. just as important as is now. but government in our time and in the founding era did other things to support commerce. right. the british army was needed to to help make america the

frontier a safe place to do commerce. the seas, ofourse, either to roads, parts, the declaration of independence, the back part, as much of it is about a failure of government as much athe actual access of government. so, richard, think about the founding and towards today what can we learn today about, what the founders knew about creating what's necessary for thriving commerce? well, they were very amazingly enought the first thing is they were too natural or princes. wills, which come again from roman time, which absolutely were rock during this particular period. and one of them is that you had to have a case heard by an independent judge. and the other one was that you had to have the right be heard before that judge in order to present your case. those were basically the only to what you would call law principles that dominate everything. but we were also extremely good developing collateral

institutions, criminal prosecutions and so forth that tended to limit their kind of scope. and all of those are written in great into our constitution. but they were not novel when they were written into the constitution. what they were is they were taking dominant state practices in institutions and doing all of this came from a kind of a natural law, a type theory and the great benefit of the natural law types there is they managed to get most of these questions right on separation of power and so forth, and i'll take you another great weakness of the theory is they didn't have a theory. so use historical observationbut couldn't give the sort of utilitarian explanation and set back up what they want. but got it extremely well. so those institutions were very much the case. i'll just give you one particular question. you look at the federal constitution as this very innocuous state, the judicial power of the united states shall extend to all cases and law and equity. and most people you own a courts of equity work very differently from courts of law and they do

is they give structural remedies and courses of law, give you particular damages. and what happened is during the cocktails mode debate, people in the colonies said we better not have these equity courts because they're going to give too much power to the turns out you can't run a legal system unless you can give specific performance of contract injunctions, foreclosures and so forth. so they it back into the particular constitute and in fact, if there's been any problem with the american system on the protection of the rule of law is they don't give equitable jurisdiction enough. so the standing requirements tied to personal injury are completely wrong headed with respect to institutions structure. so this is a case in which the older guys got it right and the newer guys are very weak. i tried to deal with structural and early history of the periods don't get it right and i enough references to this stuff today to realize that i want to set every one of the young people in this room back to their books to make sure they started an earlier time, rather than thinking that the world at the turn of the last century chris i

that's like chris go next. no, deirdre, no thanks. no, thank you. i don't want to hear the people. okay, well, we start we people. what we start over here. there's two questions here sophie. so we'll start with with you ma'am. and then next to her. and then i see a hand up over here. terrific panel for deirdre mccloskey. thank you so much for coming in 50 years of hearing about american revolution, i have never heard this take on it. and that's wonderful to hear a little revisionism. as i was really struck. you said following the facts. i i completely understand. when you said the declaration of independence was written to present the case in the most ideal, idealistic terms and thereby recruit people to the cause. it it sound a little bit. alright. so here's another piece of propaganda very much like the propaganda that is around it in all wars. but as i understand, your you are not claiming that these

people were not legitimate idealists or you know anybodyu8 can get wrong what the economic consequences are going to be. have. that's exactly right. they were i was they were idealists. there's no question about it. they were driven by ideas ideas matter more and yes. well, not more. that's kind of a meaningless statement, but there, there, there. very powerful in history and then politics. but i'm a student of ancient rhetoric. greek, roman and i don't use the word to mean bad speech that i like i use it to mean is aristotle said all the available means of unforced persuasion. and one of the things that i've

noticed and i wonder if you as a close student of these matters with me that the patria it's or much better rhetoricians than the tories and not necessarily because they had the best case. maybe maybe they didn't mean that, but they were their pens were better. don't get much better. yeah, exactly. tom tom. tom jefferson. they call it. and it's a university of virginia. they still go. and mr. jefferson anymore buddy. yeah. you know, he had he had a flowing pen. i do have to ask, maybe this is the right time. i would love to hear richard or chris's reactions to the address. main point or or final conclusion that at in with respect to commerce and please, if i'm getting this, if i missed

it in the theater, but you can put it better, but that america commercially would have performed better if we had stayed part of the empire. well, look, i mean, she's not the only one my colleague john lang is a very devoted tory on some of the issues. so it's not tory, you know. well, i mean, in the sense saying with the union, the is the presumption is always against war because of its massive disruption. and then the question is, what's the grievance that you start to have and is at least some of the grievances, what kind of right about taxation without representation. but they were overstated. and the taxes that they talked about were much less than many other taxes that were put into place. and in fact, the reason why the federalism model of the united states work is that the dominant english impulse with these couple exceptions, was the use of federalist model in which the colonies governed themselves and nd did was for fire protection against external sources. and then them to work amongst themselves. and the reason why the

constitution work is they just substituted the federal government, the head for the british crown. and what they then did is they altered such thing as who is the king, the commander in chief? yes, in the united states, but in a very different set. so there was a lot much more continuity with english institutions and roman institutions. why do you call these guys senators? right. it's not because they come from hack term for deciding the superior class. and they just carried it over with. exactly the same thing. where do you get the term republicanism, res publica things of the public matter which the way they didn't raise private time is private to the romans had that right bo modern american stuff it gets lost and so forth because nobody attends to the same decisions that they did. so it was the import tation of stable institutions from both britain, from rome, which allowed the transit and on constitutional level to work much better than you might have expected if you try to do a brave new world experiment, you want to figure out how to kill a ask ronald what? walking to put it together.

right. he'll find some clamshells somewhere and we'll be able to create a state by having people. bargain with them. no chris, i don't think that they fought the thought they would get richer. i think they fought the revolution because they wanted to govern. it's a separate it's a separate question. if could prove to the ukrainians today that they'd be much better staying in, you know, they're the bread basket. they don't have all these trade restrictions and it'd be wonderful. i don't think that to change any minds so we as to as to the the counterfeit actual i think the best comparison we have is canada and there's a young canadian economist at gw, a huge james go. so i don't know if you know him who's done some very good work this and i summarize it in two points. okay canada has always been poorer. it's one of the richest nations on earth, but it's never been as

rich as the united states. okay, never. however if you back out quebec. yes. with this with the french culture the the difference. it doesn't disappear. it gets a lot smaller. and there are actually times in the late 19th century when canada looks like living standards were actually than in the united states. so if we at the british traditions. that's true. however, no, however things have actually reversed themselves in the in the last 80 years because american turns out to be much stronger in terms of protecting economic liberties and competitive enterprise. their federal structure is not as strong as ours. and the result is we complain about the welfare, state and overregulation and, you know, i spend a lot of my time on that. it's not as bad as it is in canada. so they've actually been losing ground for about the past 30 or

40 years. so that's one. so those are those those are the facts, as i as i understand it. go ahead richard yeah, i spent a lot of time, years ago in new zealand with the greatest academic political entrepreneurs, a man named roger kirk and and if you start looking at that, britain rather new zealand is probably the second richest country in the world. around 1900. and then they taken over by the socialists. so by 1986, before roger douglas came in, what britain did is it subsidized every car at a loss and blocked every import. and what roger did not roger douglas, he said, i used to be a labor guy, but i'm not given any support for foreign exports. i'm not putting any tariffs on imports. and the country which was brain dead, started to revive. and then we have some internal reforms on this i worked on the labor laws are going to give you the numbers. all right. new zealand country, about 5 million people. yeah, 60% unionized. what we did is, we weakened

unions by 80%, but didn't destroy that. within three years there were 600,000 new jobs and. the wages started. they went down a bit as the power was waived. and then with it went up. so you came back to in 1995, after 1990 there a huge transformation. he importance freedom in terms of welfare here and the that's a perfectly of the way in which this thing happened. you want to talk about what's the source of the decline in england? you had to take one statue. what would it be? trade disputes act of 19e what it did is, it caught allies in the worst possible that issue which essentially led to a breakdown in the country and the rise of market fracture. and she never completely repair the damage. i have to ask about this and i guess we're running out of time quickly, but i have to i have to askal your counterfactual is one in which either americans never declared and defended their independence or i suppose they declared it and then lost and surely the history that would

have followed from that would have been profoundly different in terms of the american spirit, the kind of americans, the kind of people that would have come to a place like america. hard know it's hard for me to imagine this. i don'he the ancestor of most of the people who's from came to the united states for economic musings, and they were to follow mine. yours had come up and i think look it's i states still the land of opportunity for all our screw and overregulation. and son say. yeah, that's why there's a so-called crisis at this southern border. this this terrible invasion of people who want to come lands. that makes us all better off.

my, my, my small speaks. well w hard stop. we'll see. we'll have a break. and you can ask your question, but we have a hard stop with