Michael J. Sandel, Democracy's Discontent: America in Search of a Public Philosophy, Belknap Press, Cambridge, Massachusetts, 1996.
The republican conception of freedom, unlike the liberal conception, requires a formative politics, a politics that cultivates in citizens the qualities of character self-government requires. 
On the republican view, liberty is understood as a consequence of self-government. I am free insofar as I am a member of a political community that controls its own fate, and a participant in the decisions that govern its affairs.
To put the point another way, the republican sees liberty as internally connected to self-government and the civic virtues that sustain it. Republican freedom requires a certain form of public life, which depends in turn on the cultivation of civic virtue. 
Madison took rights seriously - more seriously than the Anti-Federalists - but thought that structures of government, not 'parchment barriers,' would best protect them. 
Given its hostility to human reforms, the Lochner Court's service to contemporary liberalism may not be readily apparent. Armed with the doctrine of substantive due process, it had defended the excesses of industrial capitalism and frustrated progressive reforms. In the process, it discredited both the economic theory if favored and the constitutional doctrine it used to enforce it. Later liberals would enforce different rights, but not without the worry that they, like the Lochner justices, were failing to let the majority rule.
For the first time in American history, rights functioned as trumps. Liberty no longer depended on dispersed power alone, but found direct protection from the courts. Where fundamental rights were seen to be at stake, even the principles of federalism and state sovereignty no longer impeded judicial intervention. The Lochner Court thus offered the first sustained constitutional expression of the priority of the right over the good, at least in the sense that certain individual rights prevailed against legislative policies enacted in the name of the public good. 
[what is the court (and legal system) but one branch (subsystem) in the dispersal of constitutional power?]
In Madison's view, the Constitution would make its contribution to moral and civic improvement indirectly, by empowering the national government to shape a political economy hospitable to republican virtue.
Madison's and Hamilton's contrasting visions of civic virtue explain why these allies in defense of the Constitution parted company on matters of political economy. As soon became clear, they had different ends in mind for the national government they helped create, and for the kind of citizens they hoped to cultivate. Madison sought national power to preserve the agrarian way of life he believed republican government required. Hamilton rejected the ideal of a virtuous agrarian republic. He sought national power to create the conditions for the advanced commercial and manufacturing economy that Jefferson and Madison considered inimical to republican government. Hamilton did not despair at the prospect of a modern commercial society, with its social inequalities and rampant pursuit of self-interest. To the contrary, he regarded these developments as inevitable conditions of the powerful and prosperous nation he hoped to build.
From the standpoint of twentieth-century politics, the issue between Hamilton and his republican opponents might appear a familiar contest between economic growth on the one hand and fairness on the other. But these were not the primary terms of the debate. The arguments for and against Hamiltonian finance had less to do with prosperity and fairness than with the meaning of republican government and the kind of citizen it required.
Hamilton did believe his plan would lay the basis for economic growth, but his primary purpose was not to maximize the gross national product. For Hamilton, as for Jefferson and Madison, economics was the handmaiden of politics, not the other way around. 
[For Sandel, character not constraint is the focus of early debates on political economy; political economy shapes the character of the citizenry.]
Many Americans objected that encouraging large-scale manufactures would make for a political economy inhospitable to republican citizenship. They feared that manufactures on a scale beyond that of the household or small workshop would create a propertyless class of impoverished workers, crowded into cities, incapable of exercising the independent judgment citizenship requires. As Jefferson wrote in his Notes on the State of Virginia, 'Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition.' Factory life breeds a 'corruption of morals' not found among farmers. 'While we have land to labour then, let us never wish to see our citizens occupied at a work-bench, or twirling a distaff.'
In a letter to John Jay, Jefferson's civic argument was even more explicit. 'Cultivators of the earth are the most valuable citizens. They are the most vigorous, the most independent, the most virtuous, and they are tied to their country and wedded to its liberty and interest by the most lasting bonds.' If ever the day came when there were too many farmers, Jefferson would rather Americans become sailors than manufacturers. 'I consider the class of artificers as the panders of vice and the instruments by which liberties of a country are generally overturned.'
Jefferson's objection was not to manufacturing as such, but to enterprises that would concentrate men and machines in cities and erode the political economy of citizenship. He drew sharp distinctions between household manufactures, which he favored, and extensive manufactures, which he opposed. Household manufactures did not pose a threat to the political economy of citizenship, for two reasons. First, dispersed in the country, they did not create the concentrated wealth and power of highly capitalized factory production in large commercial cities. Second, househould manufactures did not for the most part draw on the labor of citizens, but on the labor of women and children. It left able-bodied yeomen to work the land, their independence unimpaired. 
The economic debates of the Jacksonian era differ from our own in ways that go beyond the parties' stance toward government and display the persistence of republican themes in the 1830s and 1840s. Although Jacksonians and Whigs did invoke arguments of economic growth and distributive justice, these considerations figured less as ends in themselves than as means to competing visions of a self-governing republic. The Jacksonian objection to the growing inequality of wealth had less to do with fairness than with the threat to self-government posed by large concentrations of wealth and power. The Whig case for promoting economic development had less to do with increasing the standard of living or maximizing consumption than with cultivating national community and strengthening the bonds of the union. Underlying the debates between Democrats and Whigs were competing visions of a political economy of citizenship.
In different ways, both parties shared Jefferson's conviction that the economic life of the nation should be judged for its capacity to cultivate in citizens the qualities of character that self-government requires. 
As Keynesian fiscal policy rose to prominence after World War II, the civic strand of economic argument faded from American political discourse. Economic policy attended more to the size and distribution of the national product and less to the conditions of self-government. Americans increasingly viewed economic arrangements as instruments of consumption, not as schools for citizenship. The formative ambition gave way to the more mundane hope of increasing and dispersing the fruits of prosperity. Rather than cultivate virtuous citizens, government would take people's wants and desires as given, and pursue policies aimed at satisfying them as fully and fairly as possible.
From the standpoint of the republican tradition, the demise of the political economy of citizenship constituted a concession, a deflation of American ideals, a loss of liberty. Republican political theory teaches that to be free is to share in governing a political community that controls its own fate. Self-government in this sense requires political communities that control their destinies, and citizens who identify sufficiently with those communities to think and act with a view to the common good. Cultivating in citizens the virtue, independence, and shared understandings such civic engagement requires is a central aim of republican politics. To abandon the formative ambition is thus to abandon the project of liberty as the republican tradition conceives it. 
Despite the expansion of rights and entitlements and despite the achievements of the political economy of growth and distributive justice, Americans found to their frustration by the 1970s that they were losing control of the forces that governed their lives. At home and abroad, events spun out control, and government seemed helpless to respond. At the same time, the circumstances of modern life were eroding those forms of community - families and neighborhoods, cities and towns, civic and ethnic and religious communities - that situate people in the world and provide a source of identity and belonging.
Taken together, these two fears - for the loss of self-government and the erosion of community - defined the anxiety of the age. It was an anxiety that the reigning political agenda, with its attenuated civic resources, was unable to answer or even address. This failure fueled the discontent that has beset American democracy from the late 1960s to the present day. 
Americans began to think of themselves less as agents than as instruments of larger forces that defied their understanding and control. 
Despite the success of the liberal project, and perhaps party because of it, Americans found themselves the victims of large, impersonal forces beyond their control. Robert Kennedy linked this loss of agency to the erosion of self-government and the sense of community that sustains it. 
Robert Kennedy's case for decentralizing political power reflected the insight that even a realized welfare state cannot secure the part of freedom bound up with sharing in self-rule; it cannot provide, and may even erode, the civic capacities and communal resources necessary to self-government. In the mounting discontents of American public life, Kennedy glimpsed the failure of liberal politics to attend to the civic dimension of freedom. 
Respecting persons as free and independent selves, capable of choosing their own ends, meant providing each person as a matter of right a certain measure of economic security. Robert Kennedy disagreed. Unlike many liberals, he did not draw his inspiration from the voluntarist conception of freedom. His primary concern was with the civic dimension of freedom, the capacity to share in self-government. On these grounds, he rejected welfare and a guaranteed income as inadequate.
Although welfare might alleviate poverty, it did not equip persons with the moral and civic capacities to share in full citizenship. 
The anxieties of the 1980s concerned the erosion of those communities intermediate between the individual and the nation, such as families and neighborhoods, cities and towns, schools and congregations. American democracy had long relied on associations like these to cultivate a public spirit that the nation alone cannot command. As the republican tradition taught, local attachments can serve self-government by engaging citizens in a common life beyond their private pursuits, by forming the habit of attending to public things. They enable citizens, in Tocqueville's phrase, to 'practice the art of government in the small sphere within [their] reach.' 
The triumph of the voluntarist conception of freedom has coincided with a growing sense of disempowerment. Despite the expansion of rights in recent decades, Americans find to their frustration that they are losing control of the forces that govern their lives. This has partly to do with the insecurity of jobs in the global economy, but it also reflects the self-image by which we live. The liberal self-image and the actual organization of modern social and economic life are sharply at odds. Even as we think and act as freely choosing, independent selves, we confront a world governed by impersonal structures of power that defy our understanding and control. 
As affluent Americans increasingly buy their way out of reliance on public services, the formative, civic resources of American life diminish. The deterioration of urban public schools is perhaps the most conspicuous and damaging instance of this trend. Another is the growing reliance on private security services, one of the fastest-growing occupational categories of the 1980s. So great was the demand for security personnel in shopping malls, airports, retail stores, and residential communities that by 1990 the number of private security guards nationwide exceeded the number of public police officers. 
Civic conservatives have not, for the most part, acknowledged that market forces, under conditions of inequality, erode those aspects of community life that bring rich and poor together in public places and pursuits. 
A more civic-minded liberalism would seek communal provision less for the sake of distributive justice than for the sake of affirming the membership and forming the civic identity of rich and poor alike. 
Confronted with an economy that threatened to defy democratic control, Progressives such as Theodore Roosevelt and Herbert Croly and their New Deal successors sought to increase the powers of the national government. If democracy were to survive, they concluded, the concentration of economic power would have to be met by a similar concentration of political power. But this task involved more than the centralization of government; it also required the nationalization of politics. The primary form of political community had to be recast on a national scale. Only in this way could they hope to ease the gap between the scale of social and economic life and the terms in which people conceived their identities. 
The nationalizing of American political life occurred largely in response to industrial capitalism. The consolidation of economic power called forth the consolidation of political power. Present-day conservatives who rail against big government often ignore this fact. They wrongly assume that rolling back the power of the national government would liberate individuals to pursue their own ends instead of leaving them at the mercy of economic forces beyond their control.