In the writer's view (AIUI), the "consent of the governed" is not a constitutional property arising from the existence of universal suffrage, it is a dynamic property that rises and falls over time in response to political and economic events. No dictator can hold power without some degree of consent from those they govern because ultimately they can only rule by giving orders which are obeyed. If this consent collapses then the dictator is no longer in power.
In democracies the rule is by institutions rather than by individuals, but the same principle applies: we can only have a liberal capitalist democracy for as long as enough people believe that liberal capitalist democracy is the right thing. Once enough people believe otherwise the government collapses and something else (probably a lot nastier) takes its place.
Therefore it is beholden on those who manage our liberal capitalist democracy to ensure that they maintain this consent. Economic and political policies should be fashioned, in part, around this principle.
The point was that instead of focusing on maximizing utility across the whole economy, economists should have considered policies, that while not globally optimal, preserved the consent of the governed.
The recent wave of populism, Brexit, Trump, etc., can be interpreted as a revocation of that consent. The implication is that now populists might impose much worse economic policy than a moderate consent-preserving policy beforehand.
For institutions (e.g. courts) to work, people need to respect the authority of those institutions.
If you take moves that hurt trust in those institutions, people might no longer consent to being governed by them. Now, a world without courts is economically worse of, so take public trust into account when making decisions.
I'm not sure I and the other commenters read the same article. Quote: "But underlying just about every piece of economic analysis out there, general equilibrium or otherwise, has been a great big assumption of “other things equal”: that the supporting institutions within advanced economies do not change over time".
Briefly, what the author is recognizing is that economic policies have political consequences, and when economic change is so disruptive to large segments of society, the political backlash can get ugly.
In other words, economists often have blinders on, concerning themselves only with Homo Economicus, while forgetting all about Homo Politicus.
