Excerpted from Wikipedia:
Source: https://en.wikipedia.org/wiki/Laissez-faire
Date: 01-May-2017
Laissez-faire (/ˌlɛseɪˈfɛr-/, French: [lɛsefɛʁ] ( listen) from French: laissez faire, lit. ‘let do’) 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 (it/them) do”, but in this context usually means to “let go”.
Vincent de Gournay, a French Physiocrat and intendant of commerce in the 1750s, popularized the term laissez faire – he allegedly adopted it from François Quesnay’s writings on China. Quesnay coined the phrase laissez-faire, laissez-passer, laissez-faire being a translation of the Chinese term 無為 wu wei. Gournay ardently supported the removal of restrictions on trade and the deregulation of industry in France. Delighted with the Colbert-Le Gendre anecdote,[9] he forged it into a larger maxim all his own: “Laissez faire et laissez passer” (‘Let do and let pass’). His motto has also been identified as the longer “Laissez faire et laissez passer, le monde va de lui même!” (“Let do and let pass, the world goes on by itself!”). Although Gournay left no written tracts on his economic policy ideas, he had immense personal influence on his contemporaries, notably his fellow Physiocrats, who credit both the laissez-faire slogan and the doctrine to Gournay.
Before d’Argenson or Gournay, P. S. de Boisguilbert had enunciated the phrase “on laisse faire la nature” (‘let nature run its course’). D’Argenson himself, during his life, was better known for the similar but less-celebrated motto “Pas trop gouverner” (“Govern not too much”). But Gournay’s use of the laissez-faire phrase (as popularized by the Physiocrats) gave it its cachet.
The Physiocrats proclaimed Laissez-faire in eighteenth-century France, placing it at the very core of their economic principles, and famous economists, beginning with Adam Smith, developed the idea. “It is with the physiocrats and the classical political economy that the term “laissez faire” is ordinarily associated.” The book Laissez Faire and the General-Welfare State states:
“The physiocrats, reacting against the excessive mercantilist regulations of the France of their day, expressed a belief in a “natural order” or liberty under which individuals in following their selfish interests contributed to the general good. Since, in their view, this natural order functioned successfully without the aid of government, they advised the state to restrict itself to upholding the rights of private property and individual liberty, to removing all artificial barriers to trade, and to abolishing all useless laws.”
Critiques
Over the years, a number of economists have offered critiques of laissez-faire economics.
Adam Smith acknowledged deep moral ambiguities towards the system of capitalism. Smith had severe misgivings concerning some aspects of each of the major character-types produced by modern capitalist society: the landlords, the workers, and the capitalists. “The landlords’ role in the economic process is passive. Their ability to reap a revenue solely from ownership of land tends to make them indolent and inept, and so they tend to be unable to even look after their own economic interests.” “The increase in population should increase the demand for food, which should increase rents, which should be economically beneficial to the landlords. Thus, according to Smith, the landlords should be in favour of policies which contribute to the growth of in the wealth of nations. Unfortunately, they often are not in favour of these pro-growth policies, because of their own indolent-induced ignorance and intellectual flabbiness.”
The British economist John Maynard Keynes condemned laissez-faire economic policy on several occasions. In The End of Laissez-faire (1926), one of the most famous of his critiques, Keynes argues that the doctrines of laissez-faire are dependent to some extent on improper deductive reasoning, and, Keynes says, the question of whether a market solution or state intervention is better must be determined on a case-by-case basis.
Austrian economist Friedrich Hayek stated that a freely competitive, laissez-faire banking industry tends to be endogenously destabilizing and pro-cyclical. He stated that the need for central banking control was inescapable.
Original Writing
Laissez-faire capitalism is not the most efficient system for achieving the best possible outcomes. It leads to bubbles and crashes, gross wealth inequality, gross income inequality. social instability and environmental pollution and health deterioration.