Published on September 1, 2020

Laissez-faire


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Definition of Laissez-faire

Laissez-Faire is a French word which means “Leave us aloneā€. It was proposed in the 18th century by the French Physiocrats. The government interface is limited in this type of economic activity and leaves the decision on private sectors.

Description

  1. Nineteenth-century was considered as the age of Laissez-Faire fro the USA and Europe due to excess capitalism including monopoly and trust.
  2. In this type of economic system, unequal distribution of wrath is evident. As few people would have the most of the income while other people have the scarcity of wealth.
  3. To avoid the risk of unemployment presented during the 19th century the government interfere in the of most advance Laissez-Faire markets.
  4. The invisible-hand theory(1776) by Adam Smith describes the paradox of Laissez-faire.

 

“In reality, competitive markets do not guarantee that income and consumption will necessarily go to the neediest or most deserving. Laissez-faire competition might lead to great inequality, to malnourished children who grow up to raise more malnourished children, and to the perpetuation of inequality of incomes and wealth for generations.”

Reference : Samulson & Nordhaus, Economics, Fourth Edition, McGraw-Hill, 2009


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