Guest Contribution: “1776”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version in Project Syndicate. 

June 22, 2026 — Adam Smith’s book The Wealth of Nations shares with the Declaration of Independence its 1776 birth year and hence its 2026 semiquincentennial.  Both documents incarnated a set of liberal ideas that we associate with the Enlightenment.  Much is made of the egregious respects in which men who spread these ideals, at the time, fell far short of extending rights to the entire population.  This is true, of course.  But saying so leaves out how absent altogether these ideals had previously been for almost all previous civilizations in history.

For Adam Smith, liberalism meant putting the emphasis on the individual.  He contrasted the new economic philosophy with mercantilism, where each state sought to maximize its economic wealth and geopolitical power (gold reserves, colonies, armies, etc.), with the lot of the individual made subordinate to that common goal.

The liberal cause of 250 years ago called for limited government. Government, along with the class system, the Church, and the military, had been more of an instrument of oppression than the opposite.  For the last century however, “liberals” have generally favored expansion of government’s role, because government has, in the US and other advanced countries, been used to promote equality and rights, more than the opposite.  Think of federal agents enforcing the right of blacks to sit at lunch counters under the Civil Rights act of 1964.

One can make the distinction between equality of opportunity and equality of results.  The Declaration of Independence was about equality of opportunity.  The aim was to maximize the inalienable rights of individuals to life, liberty and the pursuit of happiness.   Not necessarily the actual achievement of happiness.  For a liberal of 1776, the role of government was to maintain a level playing field where the rule of law prevails.  “To secure these rights, Governments are instituted among Men…”

The discipline of economics grew out of Adam Smith’s “invisible hand.” It offered something more than just the rights of individuals to pursue their material wellbeing on a level playing field.   In the absence of market failures like pollution or monopoly, laissez faire would give an efficient outcome: it would maximize the size of the pie, though foregoing an equal distribution of income.

An enlightened view recognizes the limitations of government, and yet calls for it to supply quite a few public goods: a legal system to settle disputes, a criminal justice system to provide personal security, a common currency to facilitate financial transactions, an army to provide for the common defense, and  a system of public education — not least, to spread the lessons of civics, history, and science across all citizens.  Eventually, of course, the list came to include much more, such as regulation of occupational safety, meat inspection, and pharmaceuticals (safe but effective drugs).   Most advanced countries would add to the list a public health establishment that fights contagious disease and  a health care system that gives medical insurance to all; unfortunately there is resistance among some Americans to allowing government agencies that much power, in the name of rights.  Some countries go further, nationalizing public utilities (water, electric power, communications), for example.

The appropriate role of government is a lot broader for a modern liberal, than for a classical liberal.  The modern usage dates from the Progressive Era that began in the 1890s, or at least from the New Deal that began in 1933. In the first place, distortions like pollution and monopoly are ubiquitous, warranting government interference to achieve efficiency — e.g., taxing pollution or breaking up monopolies. (Adam Smith himself recognized that monopoly frequently spoiled the achievement of efficiency.)  In the second place, it is worth giving up a little efficiency (size of the pie) in order to limit inequality of income (the distribution of the slices).  The trade-off is necessary because interventions like progressive taxation distort incentives, which slows GDP.  But most people think that at least a little such intervention is desirable.

The US Republican party thinks of itself as fighting to reverse the century-long American drift away from the pole of pure libertarianism or laissez faire.  They want to repeal Obamacare, make the tax system less progressive, and roll back anti-trust and other regulation.  They think they also want to reduce the federal deficit and debt.   But in practice, their approach in recent years has been the opposite.  And not just on fiscal policy.  Trump has crossed thresholds of government involvement in private industry that his predecessors did not, such as grabbing shares in particular companies.  He has  pushed the country away from any point on the efficient frontier that optimizes the trade-off between efficiency and equality.

Moreover, the country has suffered a long train of abuses and usurpations at the hands of the current president.  Erratic decision-making; rampant self-enrichment; violation of laws, agreements and norms; incompetent management; heedless spending; and indiscriminate cutting of government personnel, have all hurt well-being.  They have undermined principles, like due process and equal treatment before the law, that we all thought the 1776 experiment had firmly established long ago.   One can only pray that American voters eventually come to recall the lessons that used to be taught in schools, lessons from civics, history, and science.

 This post written by Jeffrey Frankel.