Foundation of the American political economy are institutions built with ideas from Adam Smith..

Claude Fischer argues that Adam Smith’s ideas suited and fitted foundations of American political economy really well:

Builders of the American republic in the decades either side of 1800 grasped and employed new philosophical and ideological tools for its construction.  The revolutionary idea of inherent political equality—“all men are created equal” with “inalienable rights”—however limited its reality then seems looking back from now, was the Next Big Thing of the day. Also critical were economic analyses originating with Adam Smith and his British colleagues. “Free market” arguments asserted that self-interested actors uncontrolled by authorities combine to create the greatest good for the greatest number.

John Lauritz Larson, in a recent presidential address to the Society for Historians of the Early American Republic, notes a couple of important similarities between the political theories and the economic theories of America’s revolutionary era. Both sets of ideas demanded that the king’s government get off people’s backs, especially by stopping its interference in commerce. And both sets of ideas asserted, based 18th-century “scientific” analysis, that state rule distorted the God- or Providence- or Nature-given order of things. Men, advocates argued, were naturally equal and self-governing; similarly, markets were naturally productive and self-governing.

Larson goes on to make the point that there was nothing natural about the ascendency of the naturalistic argument for the laissez-faire philosophy. But we live with its seeming naturalness to this day.

May be the foundations. But likes of Chomsky would argue the opposite has been true for many years now. There is just talk of liberty and equality and reality is just oppression and cronyism.

Hamilton deferred from Smith’s ideas and advocated govt push but overall the free ideas were more prominent:

Smith’s work suited the American revolutionaries well, Larson writes, because they were claiming, not that the monarchy was injuring their private interests, but that it was trampling on natural political laws and natural human reason. Such Smithian ideas thrived long beyond the Revolution. Their interpreters, Larson shows, asserted that they were simply reporting facts of nature revealed by science.

Many early Americans resisted such claims. Hamilton and the Federalists’ projects for national improvement—roads, canals, and such—entailed unnatural state intervention, albeit on behalf of industry. More profoundly, defenders of traditional, colonial-era prerogatives such as local price and wage controls, the priority of hunting and fishing rights over private property, and claims for charity by the dispossessed, fought this new worldview. For the most part, they lost. (See this earlier post.) Ironically, the free market ideology succeeded much better here than in its European home.

In the antebellum era, the promise of the Smithian model that workers’ wages would rise and the dictum that free trade lifted all boats fell short. Instead, poverty and inequality rose. Americans’ heights actually shrunk even as their markets grew. The ideological response to this disappointment, Larson argues, was to increasingly explain poverty as a moral failure of the poor, not as a failure of the ideas. He then describes the final ideological step of that era: Although an historical and theological contradiction, some religious leaders blessed Smithian science. “‘Conditions of being’ [i.e., scientific laws] laid down ‘by our Creator’” dictated that people should get nothing unless they have earned it. Thus, most of those who had nothing deserved nothing because of their vice and sloth, not because of the market.

It is really important to argue these ideas. The economics discipline has moved away from these core ideas which is so bizarre. What goes on to form the basis of a nation and its policies is now a days just limited to some odd growth rates and hype. Such a pity really..