Lesson 3: The Constitution as an Economic Document


1.       A key to understanding people’s behavior is figuring out the incentives they face.

2.       Economic freedom, rule of law, and well-defined property rights promote growth and prosperity.

3.       Inflation (deflation) happens when the money supply grows more quickly (slowly) than output.

6.       Government is the arena of competition among interest groups.

ECONOMIC CONCEPTS that support the historical analysis:


Opportunity cost


Gains from trade


Property rights

Expected benefits v. expected costs

Collective goods



History Standards (from National Standards for History by the National Center for History in the Schools)

Era 3 – 2:  The student understands the impact of the American Revolution on politics, economy, and society

Era 3 – 3:  The student understands the institutions and practices of government created during the Revolution and how they were revised between 1787 and 1815 to create the foundation of the American political system based on the U.S. Constitution and the Bill of Rights

Economics Standards (from Voluntary National Content Standards in Economics)

Standard 3:  Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.

Standard 10:  Institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution, clearly defined and enforced property rights, is essential to a market economy.

Standard 16:  There is an economic role for government to play in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also redistribute income.


  • The Continental Congress’ lack of taxation and borrowing powers nearly lost the Revolutionary War, so the writers of the Constitution immediately established Congress’ powers to do both.
  • Large portions of the Constitution are designed to do nothing more and nothing less than to create the basis for a sound economy.
  • The Constitution also (and importantly through its impact on the nation’s economy) created the basis for a true unification of the states into a nation.
  • The Founders clearly recognized both the potential economic benefits and costs of government actions, and sought to design a document that would enhance those benefits and reduce those costs.

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