Thomas Paine is one of the most intriguing figures among late eighteenth-century English radical thinkers. While he has long been celebrated or condemned, depending on one's political persuasion, for his model of the intellectual engagé in both the American and French revolutions, in more recent times there has been renewed interest in Paine as a serious political theorist in the Anglo-American tradition. In particular, Paine's innovative analysis of the relation of politics and economics, that is, his political economy, has been subject to considerable debate among scholars. Some commentators see Paine as the bourgeois radical champion of laissez faire individualism and the minimalist ‘night watchman’ conception of government. Others identify Paine as an intellectual forerunner of working-class radicalism and the social welfare state. Paine's thought has thus become a kind of Rohrschach test for how students of classical liberalism interpret the economic dimensions of the American and French Revolution-era theorising about the state.

However, this debate about Paine's political economy typically mischaracterises his thought because commentators often fail to recognise the significance of the change over time in Paine's reflections on the economic foundations of government. In this chapter I will argue that Paine's theory of the state transformed over several decades from a minimalist conception of government consistent with the laissez faire approach of Adam Smith's harmony of interests to an idea of the ‘positive’ state including among its responsibilities a broad range of social welfare policies. We must be careful, of course, to avoid anachronistic terms and references. Thus, while Paine did not understand the ‘positive state’ precisely in terms articulated by later thinkers, especially twentieth-century progressives and social democrats, it is nonetheless arguably significant that Paine advanced major ideas on the government's role in providing social programmes that anticipated the welfare state. Particularly striking is Paine's Physiocrat-influenced recommendation in his last major work Agrarian Justice (1795) for the creation of a ‘National Fund’ designed to indemnify economically disadvantaged (i.e., landless) individuals for the loss of their common birth right to the natural property of the Earth.