Business, Legal & Accounting Glossary
With minimally restricted freedom in commerce.
The French term Laissez-faire literally means ‘Let do’. According to the classical liberal as well as the modern libertarian doctrine, laissez-faire means free and autonomous decisions by individuals with regard to economic matters and the lowering of government interference in the same.
Laissez-faire theory proposes no economic intervention by the state and encourages private initiative and production. However, the individuals involved in the production of goods and services must also take into account the personal and property rights of other individuals.
Literally, laissez-faire is French for “let it be.” More usefully, laissez-faire is a philosophy that favours the government keeping its hands off the economy. In other words, supporters of laissez-faire believe only free market forces should determine prices, production, wages, and other key elements of the economy. At the opposing pole of laissez-faire economics are command economy systems where the government controls all means of production. The effectiveness of laissez-faire policies continues to be argued vigorously. Nearly all economists agree that complete laissez-faire is impossible for today’s U.S. economy. Moreover, voters’ expectations of an important role for government in the economy has made laissez-faire politically unpalatable. But the laissez-faire philosophy, which continues to provide the intellectual underpinning for advocates of limited government, remains a potent force in economic debate.
The laissez-faire theory has certain prominent characteristics. These are:
The two strongest supporters of laissez-faire theory are the Chicago School of Economics and the Austrian School of Economics.
Following are certain concepts that are related to laissez-faire:
Classical economics is that part of economics that deals with what has been done in the subject in the 18th and 19th century. Classical economists mainly dealt with various ways in which market economies and markets functioned.
Individual transfer quota – ITQ is a limitation imposed by a particular governing body on individuals and companies. These limits are imposed on the amount of a particular good or service that may be produced by the entity on whom it is imposed.
The invisible hand is a concept that has been coined by Adam Smith, a noted economist, in “An Inquiry into the Nature and Causes of the Wealth of Nations”, written in 1776. As per this concept, individuals contribute to social improvement by making efforts to improve their respective financial conditions.
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This glossary post was last updated: 1st April, 2020 | 8 Views.