What Is Laissez-Faire?

Laissez-faire is an economic theory dating back to the 18th century that opposes any government intervention in business affairs. The driving principle behind laissez-faire economics is that the less the 澳洲幸运5官方开奖结果体彩网:government is involved in the economy, the better off business, and society as a whole, will bꦺe.﷽

It is a French term that translat💜es to “leave alone,” or more literally t🐠o “let you do.”

Laissez-faire economics is a key component of 澳洲幸运5官方开奖结果体彩网:free-market capitalism.

Understanding Laissez-Faire

The underlying beliefs that make up the fundamentals of laissez-faire economics include the idea that economic competition constitutes a “natural order” that rules the world. Because this natural self-regulation is the best type of regulation, laissez-faire 澳洲幸运5官方开奖结果体彩网:economists argue that there is no need for business and industrial affairs to be complicated by 澳洲幸运5官方开奖结果体彩网:government intervention.

As a result, they oppose any sort of federal involvement in the economy, which includes any type of legislation or oversight; they are against 澳洲幸运5官方开奖结果体彩网:minimum wages, duties, trade restrictions, and 澳洲幸运5官方开奖结果体彩网:corporate taxes. In fact, laissez-faire economists see such taxes as꧙ a penalty for production.

History of Laissez-Faire

Popularized in the mid-1700s, the doctrine of laissez-faire is one of the first articulated economic theories. It originated with a group known as the Physiocrats, who flourished in France from about 1756 to 1778. These thinkers tried to apply scꦆientific principles and methodology to the study of wealth and economic production.

These economists argued that a free market and free economic competition were extremely important to the health of a free society. They believed the government should only intervene in the economy to preserve property, life, and individual freedom; otherwise, the natural, unchanging laws that govern market forces and economic processes—what later British economist 澳洲幸运5官方开奖结果体彩网:Adam Smith dubbed the “澳洲幸运5官方开奖结果体彩网:invisible hand”—should be allowed to proceed unhindered.

Unfortunately, an early effort to test laissez-faire theories did not go well. As an experiment in 1774, Turgot, Louis XVI’s Controller-General of Finances, abolished all restraints on the heavily controlled grain industry, allowing imports and exports between provinces to operate as a free trade system. But when poor harvests caused scarcities, prices shot through the roof; merchants ended up hoarding supplies or selling grain in strategic areas, even outside the country for better profit, while thousands of French citizens starved. Riots ensued for several months. In the middle of 1775, order was restored, and with it, government controls over the grain market.

Despite this inauspicious start, laissez-faire practices, developed further by such British economists as Smith and 澳洲幸运5官方开奖结果体彩网:David Ricardo, ruled during the 澳洲幸运5官方开奖结果体彩网:Industrial Revolution of the late 18th and early 19th centuries. And, as its detractors noted, it resulted in u𒅌nsafe working conditions and large wealth gaps.

Criticism of Laissez-Faire

Laissez-faire advocates argue that if individuals serve their own interests first, societal benefits will follow. One of the chief criticisms of laissez-faire is that capitalism as a system has moral ambiguities built into it; it does not inhere🌄ntly protect the weakest in society.

As such, d💃etractors feel laissez-faire actually leads to poverty and economic imbalances. The idea of letting an economic system run without regulation or correction in effect dismisses or further victimizes those most in need of assistance, they say.

The 20th-century British economist 澳洲幸运5官方开奖结果体彩网:John Maynard Keynes was a prominent critic of laissez-faire economics, and he argued that the question of market solutions vs. government intervention needed to be decided on a case-by-case basis.

The Bottom Line

Laissez-faire refers to an economic theory opposed to government intervention in the market. A central element of free-market capitalism, laissez-faire posits that businesses and society as a whole are significantly better off without gover🐼nment involvement. The idea dates back to 18th century France, and is popular in countries with libertarian values in the present.