[Mr. Brookhiser is the author of "Alexander Hamilton, American" (Free Press, 2000) and the forthcoming "What Would the Founders Do? Our Problems, Their Solutions" (Basic).]

When I was a boy my family had a Time-Life book on the mind which featured a chart of the presumed IQs of famous dead men. Goethe, as I recall, led the pack, at 210. But the Founding Fathers did very well: Benjamin Franklin, Thomas Jefferson and George Washington all scored over 150. As the Fourth of July approaches, we'd do well to remember that the Founders were a smart lot, with few gentleman's Cs among them. Yet they didn't know everything. They were strongest in law, political philosophy, and history -- all essential subjects for revolutionaries and statesmen. But another subject, equally vital to the success and happiness of countries, lay beyond the ken of most of them: economics.

In part, this lack was a function of their backgrounds. Most of the Founders were lawyers or planters. A few were merchants. None was a manufacturer: There was almost no manufacturing in the infant United States. In part, their ignorance had to do with the newness of the discipline. Modern economics was just beginning, in France and Scotland. Adam Smith's Wealth of Nations came out in 1776. The Founders knew of Smith and his peers -- David Hume, James Steuart, Jacques Necker -- but not intimately. Smith was probably better known as a psychologist; John Adams plagiarized his Theory of Moral Sentiments.

There had been a revolution in financial practice in the century before the founding, with the institutionalizing of modern banking. Holland led the way in the 17th century, followed by Britain (the Bank of England was chartered in 1694). Banks helped individuals; they also helped governments pay their way by issuing debt as bonds. The Founders knew of this development too, though unfortunately much of what they knew was wrong. The Bank of England, during the tenure of the long-serving Whig Prime Minister Robert Walpole (1721-42), became a demonic institution in the polemics of Tories and radical Whigs, Walpole's enemies to his right and left. They blasted Walpole for stealing elections, bribing pols, and using the Bank to enrich his crooked financier friends. These complaints made little impression in Britain, but Americans of a later generation, looking for a language to criticize their imperial overlords, swallowed them whole, especially when they flowed from the sprightly pen of Henry St. John, Viscount Bolingbroke, a rascally but eloquent perennial office seeker (Adams and Jefferson admired Bolingbroke; Washington owned a complete set of his journalism). America's legitimate grievances against Britain for curtailing its rights were interwoven with suspicions of concentrated monetary power.

When the Founders got the chance to run their own economic affairs, they stumbled. Throughout the Revolutionary War Congress lacked the power to tax the states. (It could make requisitions on them for money -- i.e., beg. Robert Morris, superintendent of finance, said this was like "preaching to the dead.") Congress turned instead to fiat money and borrowing. American dollars quickly became worthless. In 1780 Congress called them in and printed new ones, worth 40 old ones; the new dollars inflated in turn. Congress got loans from France, America's ally, and from Dutch bankers who were willing to take a flier on the new nation. But once America stopped making interest payments, the loan market dried up. After the war the states, which had run up debts of their own, tried raising money in a variety of ways, from printing state paper money, to levying desperate and crushing taxes (Massachusetts' land tax provoked an armed taxpayer revolt in 1786-87, Shays's Rebellion). By the end of the decade American securities were trading at one-quarter to one-third of their face value on European money markets. The Founders, for all their personal and political daring, were on the way to founding a banana republic, though, if the U.S. had been the first one, the name would be maple republic.

A handful of Founders were not so clueless. Robert Morris and his occasional assistant and business partner Gouverneur Morris (no relation) knew their way around the world of money. Robert, a Liverpool-born Philadelphia merchant, was reputed to be the richest man in North America; like many high-rollers, he had a weakness for doubling up when his bets went south, and he ended up in debtors' prison. Tench Coxe, another Philadelphian, grasped the importance of the emerging manufacturing sector, the high tech of its day. Philip Schuyler, an upstate New York grandee, somehow knew more than his fellow landowners, perhaps because the Schuylers had been involved in the West Indies trade before the Revolution.

Most knowledgeable was Schuyler's most valuable West Indian import, his son-in-law Alexander Hamilton. Hamilton was an autodidact. He apprenticed as a merchant's clerk in the Virgin Islands, never finished college, and sponged up economic theories and data in his spare time as a colonel on Washington's staff. When he was barely 20 he began writing letters of economic and political advice to his elders and betters. Washington had no deep understanding of economics, but he understood Hamilton's energy and gifts. When he became president under the new Constitution in 1789 he made Hamilton first Treasury Secretary.

Cleaning up the American mess had to start with political reform. The Constitution, which Washington, Hamilton and both Morrises signed, gave the United States a revenue stream by allowing Congress to tax imports and products, such as whiskey and salt. (Income taxes were unconstitutional.) This change alone began to boost the value of American securities even as Hamilton took office. Hamilton strengthened American credit further by taking over the states' debts and announcing that all creditors would be paid at a common rate. To make good on that pledge, he had to overcome congressional resistance to rewarding speculators who had bought up debt. But Hamilton knew that if the United States started picking and choosing among its creditors, its credit would go back into the outhouse.

By paying America's debts responsibly, Hamilton made American IOUs valuable. "It is a well known fact," he wrote, "that in countries in which the national debt is properly funded . . . it answers most of the purposes of money." He thus monetized a cash-strapped, backwater economy. To handle the government's funds, and to regulate the money supply, Hamilton asked Congress to charter the Bank of the United States. America would join Holland and Britain in the vanguard of the financial revolution. The Bank had to overcome the objections of Secretary of State Jefferson, and Virginia Congressman James Madison, who thought chartering such a corporation was unconstitutional. Madison's opposition pained Hamilton, since he and Madison had worked together in the struggle to ratify the Constitution. Madison, he concluded, was a "clever man," but "very little acquainted with the world." The world recognized Hamilton's knowledge. When he stepped down as Treasury Secretary in 1795, American securities were trading at 110% of face value.

Not everything Hamilton did worked. With help from Coxe, he wrote a Report on Manufactures, which looked forward to bringing an agrarian nation into the 19th century. Hamilton wanted to kick start American factories by offering subsidies to infant industries. His plans went bust when William Duer, a friend of his, took the funds for a tech center that Hamilton planned in New Jersey and blew them in the securities market.

His successes and Duer's fall convinced Jefferson and other Founders that Hamilton was a transatlantic twin of the evil Robert Walpole. When Jefferson became president in 1801, he hoped to undo Hamilton's system. Jefferson's Treasury Secretary, Albert Gallatin, did cut spending and taxes. But, as far as Hamilton's financial machinery was concerned, he told Jefferson that it was "the most perfect system ever formed."

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There is a lot more formal economic learning in America now than there was in the late 18th century; American universities churn out Ph.D.s in economics. A more important sign is that, as the investor class expands, more Americans are learning about the world of money hands-on, the way Alexander Hamilton did. We may never join Goethe, Franklin and Jefferson on a chart of all-star IQs, but, like the savviest founder, we may understand how the economy works.