This chapter discusses the idea of natural liberty as it was expressed by key early modern thinkers, and how Smith made this into the basis for a system of political economy. This lays to foundation for a discussion of List’s criticism of Smith’s system, and how he presented his own national system of political economy by inverting ideas positions he found in Smith’s Wealth of Nations. On the basis of the role of philosophy in Smith and List’s respective systems of political economy is consider, specifically with respect to how they pertain these thinkers’ differing views on whether economic activity should be directed by governments or by the actions of individuals. Listian ideas have been adopted by neo-Schumpeterian scholars, and in particular are List’s arguments against Smith’s system of natural liberty are echoed in arguments against neoclassical economics and the view that innovation policy should be restricted to fixing market failures.