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Laissez-faire is a philosophy that says the government will not be involved in business and a country’s economy but instead protect the rights of the citizens. This way, the economy grows stronger.
A Little More on What is Laissez-Faire
Laissez-faire is French for ‘let do.’ Loosely, it means that the government should let the market run without interference, the market to do its thing. In such an economy, the laws of supply and demand will work efficiently. Supply involves market aspects such as capital, natural resources and labor while demand involves buying of goods and services by consumers, the government or even other businesses. A Laissez-faire economy is normally affected by monopolies, theft and fraud, aspects which interfere with the rational market theory. The government’s only role is to protect the citizens from fraud, theft and coercion. For a Laissez-faire economy to work efficiently, a free market, capitalism and a rational market theory are needed.
Decisions involving finance and trade should be left to individual businesspeople. When competition between business and individuals is unregulated, there is steady progress and there is a balance between supply and demand. In the 18th century, Colbert, the then French finance minister, met with Le Gendre, a businessman. When asked how the government could help businesses, Le Gendre, said the government should ‘let them do as they wish.’
Top make the economy thrive, the US government, in its Constitution, has come up with policies to protect businesspeople and the free market.
Article 1, section 8 provides that innovations are protected as property.
Section 9 and 10 of Article 1 protects free trade and enterprise by ensuring states do not tax goods and services from other states.
Amendment IV offers protection of private property by ensuring the government does not use its powers to conduct searches and seizures that do not follow the law. Amendment V provides private property will be protected while Amendment XIV ensures the government does not seize private property without following due course of the law.
Amendments IX and Amendment X provides that the government will not interfere with the rights of the citizens if the Constitution does not expressly outline that it does so.
Laissez Faire and Economic Growth
In a Laissez-faire economy, individuals are motivated to create wealth without the government interfering. In such an economy, no king or queen can ask people to give them money but instead people become innovative and inventive and work towards getting rich. The economy teaches entrepreneurs to create products or services that will meet the needs of consumers. Businesspeople also have to be quicker than competitors and offer competitive prices. Basically, when people are working to increase their wealth, they work harder, smarter and longer than they would if they were working for the government.
References for Laissez-Faire
Academic Research on What is Laissez-faire
How responsive are private transfers to income? Evidence from a laissez–faire economy, Cox, D., Hansen, B. E., & Jimenez, E. (2004). Journal of Public Economics, 88(9-10), 2193-2219. This paper examines the impact of private transfers on income in a Laissez Faire economy. It takes a look at Philippines, which has a smaller public sector than the US. The paper observes ‘crowding out’ in the private sector influences ‘crowding out’ in the public sector and this in turn influences income. The study finds out that strong transfer derivatives are only applicable among low-income families. It also finds out that any attempts to uplift the poor are disillusioned by the private sector which only entices the rich.
Small scale industry in a laissez–faire economy: a Hong Kong case study, Sit, V. F. S., Wong, S. L., & Kiang, T. S. (1979). Centre of Asian Studies occasional papers and monographs; no. 30. This paper is a regional study of small scale industries in Asia and Pacific regions. It expounds on the similarities and differences between industries and Hong Kong and other regions.
Environmental Protection in a” Laissez–Faire” Economy, Hills, P. (1985). Built Environment (1978-), 268-282. This paper examines environmental protection in Hong Kong. It notes that Hong Kong has not protected the environment as it should have and there are pressures from the industry to keep the city in its place in the world market. However, fragmentations and responsibilities in government has reduced the impact of environmental measures the city is undertaking.
Consumer’s Rights in the Laissez–Faire Economy: How Much Caveat for the Emptor, Narveson, J. (2004). Chap. L. Rev., 7, 181. This paper examines the rights of a consumer in a Laissez Faire economy. It shows that while the rights of a consumer and those of the entrepreneur arte protected, it is still the responsibility of the consumer to stay aware. In a very competitive market, entrepreneurs will work towards making more money and if the consumers do not protect themselves, they might end up being exploited. It also examines the terms of Caveat Emptor/Buyer Beware, and how much the consumer needs to stay safe.
Job Security Issues in a Laissez–faire Economy: the Case of Hong Kong, Glofcheski, R. A. (2008). In The International Conference in Commemoration of Prof. Marco Biagi. Marco Biagi Foundation and ADAPT. Hong Kong is among the leaders in the world market. This paper examines issues related to job security in Hong Kong and relates that to other cities around the world. In a Laissez-faire economy, there is a lot of competition between entrepreneurs and this could cost most people their jobs.
Whither the Laissez–faire Economy? Hong Kong and the Development of a Knowledge Economy, CHUNG, W. K. (2011). Laissez Faire economies have been shown to develop economies in leaps but they have also lead to the creation of merchants and elites who rely on knowledge to create wealth. This paper takes a look at the situation in Hong Kong and the emergence of a knowledge economy where innovations and inventions reign.
The Laissez–Faire Economy and the Condition for an Efficient Allocation of Housing Capital and Building Land, Gutting, B. (1987). In Taxation, Housing Markets, and the Markets for Building Land (pp. 15-53). Springer, Berlin, Heidelberg. This paper looks at how a Laissez-faire economy affects the allocation of housing capital and of building land.
The Political Economy of Regulating Tobacco in a Laissez Faire Heaven: The Hong Kong Model, Mushkat, M., &Mushkat, R. (2017). Tul. J. Int’l & Comp. L., 26, 277. Smoking is increasingly being associated with various forms of cancer and other physical and psychological conditions. While most countries and cities have set policies to alleviate the problems, Hong Kong has been reluctant to address the effects of tobacco use. This paper examines the territory’s governance to shed light on the regulations in the area.
The destructiveness of laissez–faire leadership behavior., Skogstad, A., Einarsen, S., Torsheim, T., Aasland, M. S., &Hetland, H. (2007). Journal of occupational health psychology, 12(1), 80. The author in paper hypothesizes that laissez-faire leadership at work does not mean zero leadership but destructive leadership that influence workplace stressors, bullying and distress. A sample of 2,273 Norwegian employees showed that Laissez-faire was related to role conflicts and ambiguity and conflicts between coworkers. The author concludes that Laissez-faire is a destructive form of leadership.
A laissez–faire approach to monetary stability, Greenfield, R. L., & Yeager, L. B. (1983). Journal of Money, Credit and banking, 15(3), 302-315. In a Laissez-faire economy, entrepreneurs are allowed to make independent decisions which affect the amount of wealth they create. It looks at how the principle can be used to enhance monetary stability.
The intellectual history of laissez faire, Viner, J. (1960). The Journal of Law and Economics, 3, 45-69. This paper is an analysis of the history of laissez faire and how the principle has progressed over time. It looks at the intellectual history of the principle and the effects it has had on economies.