This chapter examines the debate into the intellectual tradition of political economy thus putting into sharper focus the principal theoretical questions involved. It explores the salient characteristics of welfare states since the conventional ways of measuring welfare states in terms of their expenditures will no longer suffice and outlines “sociologize” the study of welfare states. One prominent conservative school promoted a “Monarchical Welfare State” that would, at once, provide for social welfare, class harmony, loyalty, and productivity. The social democratic model, then, puts forward one of the leading hypotheses of contemporary welfare state debate: the argument that parliamentary class mobilization is a means for the realization of socialist ideals of equality, justice, freedom, and solidarity. Two types of approaches have dominated in the explanation of welfare states: one, a systemic theory; the other, an institutional or actor-oriented explanation. The classical political economists made it clear why democratic institutions should influence welfare state development.