Origin and history of dispensation

mid-14c., dispensen, "to dispose of, deal or divide out," from Old French dispenser "give out" (13c.), from Latin dispensare "disburse, administer, distribute (by weight)," frequentative of dispendere "pay out," from dis- "out" (see dis-) + pendere "to hang, cause to hang; weigh; pay" (from PIE root *(s)pen- "to draw, stretch, spin").

In Medieval Latin, dispendere was used in the ecclesiastical sense of "grant licence to do what is forbidden or omit what is required" (a power of popes, bishops, etc.), and thus acquired a sense of "grant remission from punishment or exemption from law," hence the use of the English verb in the senses "to do away with" (1570s), "do without" (c. 1600). The older sense is preserved in dispensary. Related: Dispensed; dispensing.

1530s, "household management," from Latin oeconomia (source of French économie, Spanish economia, German Ökonomie, etc.), from Greek oikonomia "household management, thrift," from oikonomos "manager, steward," from oikos "house, abode, dwelling" (cognate with Latin vicus "district," vicinus "near;" Old English wic "dwelling, village," from PIE root *weik- (1) "clan") + nomos "managing," from nemein "manage" (from PIE root *nem- "assign, allot; take").

The meaning "frugality, judicious use of resources" is from 1660s. The sense of "wealth and resources of a country" (short for political economy) is attested from 1650s, but even in the 1780s the American Founders in laying out the new republic generally used economy only as "frugality." So also in that sense in the Federalist, except in one place where full political economy is used.

Col Mason — He had moved without success for a power to make sumptuary regulations. He had not yet lost sight of his object. After descanting on the extravagance of our manners, the excessive consumption of foreign superfluities, and the necessity of restricting it, as well with oeconomical as republican views, he moved that a Committee be appointed to report articles of Association for encouraging by the advice the influence and the example of the members of the Convention, oeconomy[,] frugality[,] and american manufactures. [Madison, Sept. 13, 1787, in Farrand, "Records of the Federal Convention;" the motion was agreed to without opposition]