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No offense intended, but some of these answers miss the mark by a wide margin, and most are only partly correct.
Contrary to popular opinion, the method of electing the President did not come about merely because of the concerns of small states nor because the Founders did not trust the masses. To varying degrees depending on which Founder we're talking about, both issues were certainly a concern, but they were side-issues with regard to the executive.
To understand the purpose of the electoral college, it is necessary to fully wrap one's mind a couple concepts that are hard to conceive in the modern world.
First, we must realize we live in a democratic-republic. The Founders were acutely aware of history, particularly Greek and Roman history, and they modeled their form of government on what they saw as the best aspects of both, with a bit of the British parliamentary system thrown in for good measure. It would take too much space to explain exactly why they liked neither pure republics nor pure democracies. Suffice to say for our purposes, it was not merely because the masses could not be trusted. It would be more correct to say that the masses living in Maine could not be trusted to vote with the best interests of the masses who live in Florida at heart. That is as true today as it was then.
Second, and most importantly, the executive was never conceived to be the important political figure that he quickly became. In fact, a great deal of what went on at the convention was shaped specifically to prevent him from acquiring the kinds of powers and status that he holds. The Founders' idea was that the fundamental power of government would rest with the legislative branch of government and that the executive would merely act as one who would execute laws that Congress passed. He was given certain powers that served as a check on congressional authority, and he was given a few others that would serve his secondary function as head of state. Read the Constitution. The President's office is sparsely defined, and textually, he has very little power.
The point of understanding these concepts is to note that the election of the President was not originally conceived to be a matter of such great importance, nor one in which the people at large would hold a great interest except in his function as head of state, the latter being his function as the "face" of the country. In the Framers' minds, government began at home where democracy was given as free a reign as a majority of those free citizens who inhabited those homes were willing to give it. Everything on the national level was representative.
This is a simplistic analogy that would fail under close scrutiny, but it helps in understanding how the Framers' saw this. Ask yourself if you are particularly troubled by the fact that you get no direct vote on who is the leader of the United Nations. I seriously doubt even many political junkies like us have given it a second thought. Again, this comparison is not a direct one, but it comes close to how those who debated and formed the Constitution thought of the matter. Those who formed the Constitution wanted a greater centralization of power, but they wanted that power dispersed, the most important parts of it, the ability to make laws, resting in a body with many members representing their States', and presumably the people of those States', interests.
Many methods of electing the person or people (the exact make-up of the executive was also debated) who would hold the executive power were discussed, including popular election, a measure advanced by Madison of all people. But that method was discarded as both unwise and impractical, the latter for reasons obvious to anyone living in the 18th century. Other methods considered included election by the Senate, the House, and by a body of 25 electors appointed by the legislature and immediately disbanded after the selection of the executive body. Agreement was found in none of these measures because of disputes over to what roles the separate houses of the legislature would play.
The method finally adopted was a compromise more on the role of legislature in choosing the executive than it was over concerns about state influence or mass voting behavior. Because of how deeply people held their State identities, the electoral college was not expected actually to choose the President. What it was expected to do was whittle down the possible choices to a few, none of which would receive a clear majority, after which the question would be thrown into the representative body of the House for the final decision. In other words, the election of the President was conceived as a two-fold process, first the selection of "candidates" by the States, and then the selection of the President and Vice-President by the House.
The impracticality of a national referendum is no longer relevant in modern society, but the wisdom of it, keeping in mind our form of government and the way it was intended to be structured, is another matter. One could argue -- and I would -- that the President has acquire far too much power in the modern world, this being a function of both the political party system itself and its relationship to how Congress has diluted its own authority in favor of the President for partisan purposes.
I will suggest that making the election of the President a national, i.e. federally controlled, election, imbues the Presidency with even more authority by giving him control over the election process itself as executor of the laws. This would be the not-often-discussed aspect of removing state authority over its elections that, in my mind, has the most potentially chilling consequences. Currently, the executive branch has no authority under the Constitution, aside from declaring martial law and suspending it, to suspend, delay, or otherwise control the election process. Make the election national, and he does.
Sorry for the length and any typos...I've not proof-read this as fully as I should.
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