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Laissez Faire

Definition

Laissez-faire is an economic system in which transactions between private parties are free from government intervention such as regulation, privileges, tariffs and subsidies. The phrase laissez-faire is part of a larger French phrase and basically translates to "let do", but in this context usually means to "let go".

What is 'Laissez-Faire'

Laissez-faire is an economic theory that became popular in the 18th century. The driving principle behind laissez-faire, a French term that translates as "leave alone" (literally, "let you do"), is that the less the government is involved in the economy, the better off business will be – and by extension, society as a whole. Laissez-faire economics are a key part of free market capitalism.

Explaining 'Laissez-Faire'

The underlying beliefs that make up the fundamentals of laissez-faire economics include, first and foremost, that a "natural order" rules the world. Because this natural self-regulation is the best type of regulation, laissez-faire economists argue that there is no need for business and industrial affairs to be complicated by 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 minimum wages, duties, trade restrictions, and corporate taxes. In fact, laissez-faire economists see such taxes as a penalty for production.

Critiques of Laissez-Faire

One of the chief critiques of laissez-faire is that capitalism as a system has moral ambiguities built into it: It does not inherently protect the weakest in society. While laissez-faire advocates argue that if individuals serve their own interests first, societal benefits will follow, detractors 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.

History of Laissez-Faire

Developed in the mid-1700s, the doctrine of laissez-faire is one of the first articulated economic theories. It's thought to have originated with a group known as the Physiocrats, who flourished in France from about 1756 to 1778; led by a physician, they tried to apply scientific principles and methodology to the study of wealth. These "économistes" (as they dubbed themselves) argued that a free market and free economic competition were extremely important to the health of a free society. The government should only intervene in the economy in order to preserve property, life, and individual freedom; otherwise, the natural, unchanging laws that govern market forces and economic processes – what another laissez-faire advocate, British economist Adam Smith, dubbed the "invisible hand" – should be allowed to proceed unhindered.


Further Reading


The case for financial laissez-faire
www.jstor.org [PDF]
The argument for financial laissez-faire (or free banking) is essentially very simple: if free trade is generally desirable, then what is wrong with free trade in the financial services sector? If nothing is wrong with it, the whole panoply of government intervention into the …

Finance and its reform: Beyond laissez-faireFinance and its reform: Beyond laissez-faire
link.springer.com [PDF]
The argument for financial laissez-faire (or free banking) is essentially very simple: if free trade is generally desirable, then what is wrong with free trade in the financial services sector? If nothing is wrong with it, the whole panoply of government intervention into the …

Payments technologies, financial innovation, and laissez-faire bankingPayments technologies, financial innovation, and laissez-faire banking
heinonline.org [PDF]
The argument for financial laissez-faire (or free banking) is essentially very simple: if free trade is generally desirable, then what is wrong with free trade in the financial services sector? If nothing is wrong with it, the whole panoply of government intervention into the …

Scottish banking before 1845: a model for laissez-faire?Scottish banking before 1845: a model for laissez-faire?
www.jstor.org [PDF]
The argument for financial laissez-faire (or free banking) is essentially very simple: if free trade is generally desirable, then what is wrong with free trade in the financial services sector? If nothing is wrong with it, the whole panoply of government intervention into the …

First Amendment Antitrust: The End of Laissez-Faire in Campaign FinanceFirst Amendment Antitrust: The End of Laissez-Faire in Campaign Finance
heinonline.org [PDF]
The argument for financial laissez-faire (or free banking) is essentially very simple: if free trade is generally desirable, then what is wrong with free trade in the financial services sector? If nothing is wrong with it, the whole panoply of government intervention into the …

The informal sector: legalization or laissez-faireThe informal sector: legalization or laissez-faire
heinonline.org [PDF]
The argument for financial laissez-faire (or free banking) is essentially very simple: if free trade is generally desirable, then what is wrong with free trade in the financial services sector? If nothing is wrong with it, the whole panoply of government intervention into the …



Q&A About Laissez Faire


How did laisser faire originate?

It originated with a group known as the Physiocrats who flourished in France from about 1650 until 1776.

What does laissez-faire mean?

Laissez-faire means "leave alone."

What are some criticisms of laisser faire?

Critics say that capitalism as a system has moral ambiguities built into it; it doesn't inherently protect the weakest in society. They argue that if individuals serve their own interests first, societal benefits will follow, but detractors feel this actually leads to poverty and economic imbalances. The idea of letting an economic system run without regulation or correction dismisses or further victimizes those most in need of assistance, critics say.

What is free market capitalism?

Free market capitalism is an economic system where prices for goods and services are set freely by supply and demand rather than by government regulation

What is laissez-faire?

Laissez-faire is an economic theory that became popular in the 18th century.

Why do people support laissez-faire economics?

People support laissez-faire economics because they believe it will lead to a better economy for everyone.

Who developed one of the first articulated economic theories called "laisser faire"?

The Physiocrat developed one of the first articulated economic theories called "laisser faire".

Who are the Physiocrats and what do they have to do with laissez faire?

The Physiocrats were a group of French economists who believed that land was the only source of wealth, so they supported free trade and private ownership of land, which led them to support laissez faire.