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Essay on Laissez Faire Methods in Macroeconomics
Abstract
The purpose of this paper is to explain the history of Laissez Faire and its disadvantages and advantages.
Introduction
First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. Laissez-faire economic policy is in direct contrast to statist economic policy. Laissez-faire is defined as:
“An economic policy or doctrine that opposes government interference in or regulation of business or commerce beyond what is necessary for a free-enterprise system to regulate itself.”
Adam Smith played a large role in popularizing laissez-faire economic theories in English-speaking countries, though he was critical of a number of aspects of what is currently thought of as laissez-faire such as lack of government regulation of business practices. (Harvey, 1990)
Thomas Jefferson was one of the first to use the laissez-faire philosophy, as it can easily be interpreted through his inaugural speech. Laissez-faire philosophy was dominant in the late 19th and early 20th century in the wealthier countries of Europe and North America. Many historians also see that period as the height of laissez-faire's implementation in those countries. However, there are critics who suggest that what was described as "laissez-faire" policy was simply pro-business policy, as with large subsidies for businesses to produce the railroads in the United States or the common use of tariffs by Republican presidents there. For many, laissez-faire theories fell into disrepute because of their failure to allow governments to deal with managing the economy during and after World War I, and their alleged role in creating the Great Depression.
However, some libertarians, such as Milton Friedman argue that by the time of the Great Depression, significant government economic regulation had already taken place in most major economies, as workers and employees in all industries organized..........
