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flyawayxxballoon's avatar

Would our economy be better off if we followed the Laissez-Faire Theory [U.S.]?

Asked by flyawayxxballoon (1352points) September 2nd, 2008

The Laissez-Faire Theory was presented in the book The Wealth of Nations, written by economist Adam Smith in 1776. The main theme/point of the book is his concept of the invisible hand. It basically states that if the government would stay out of the economy, other than a few exceptions, it would work out on its own. If we had chosen this economic method rather than our current one, would our economy be better off now?

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19 Answers

Poser's avatar

To quote your source:
”‘Laissez Faire Capitalism’ is actually redundant, due to the nature of Capitalism. Therefore, simply “Capitalism” is sufficient to get the point across although historically it has been misrepresented as compatible with government economic interference.”

I’m wondering if this has ever truly been tried. I believe it’s a much better method than our current one.

flyawayxxballoon's avatar

@Poser;To answer your question, it has never offically been tried. That’s exactly why I was wondering how our economy would have turned out if we’d gone with Laissez-Faire rather than our current method.

Poser's avatar

Couldn’t be much worse.

Michael's avatar

Well, the closest America’s ever come to a pure “laissez-faire” economic policy was during the period that is commonly referred to today as the Gilded Age. During this time (roughly 1875 to 1895), there was very little government oversight of business and, not surprisingly, corporations boomed, and a some people became extremely wealthy. On the other hand, during the Gilded Age America experienced its most acute wealth gap, with the vast majority of the country’s resources pooled in very few hands. Furthermore, most economists credit the policies of the Gilded Age with resulting in a massive depression (known as the Panic of 1893, this was the most serious economic crisis in the country’s history to that point), which then led to the “Progressive Era” in which attempts were made to ameliorate some of the excesses of the Gilded Age.

stratman37's avatar

Michael: lurve to you for a knowledgeable answer, and for using the word ameliorate.

marinelife's avatar

Perhaps we would be better off economically (and I am not even convinced of that), but what about the safety of products? What about our environment? What about our food supply? What about decent wages and hours and working conditions? Businesses do as little as they can get away with.

Protecting people is not part of their corporate view. Profit is.

Not economic benefit for the many, but profit for the few.

stratman37's avatar

Good point, Marina!

SquirrelEStuff's avatar

What about the safety of products, environment, food supply, and decent wages and work safety?
Not to be mean, Marina, but I think those things are in danger with our current system because we are so trusting that our government will protect us from these things and I think they are doing a terrible job. I work in construction, where OSHA makes sure there are no work place violations that might immedietly harm us, but don’t do a thing about the things that could harm us in the long run (dust, ceiling tiles, other carcinogens).

flyawayxxballoon's avatar

@Marina; I don’t know if these were listed in any of my sources, but the government is limited to the following:

-foreign relations and national defense
-the maintenence of police and courts to protect private property and the health, safety, and morals of the people
-other functions that cannot be performed by private enterprise at a profit
Courtesy of Magruder’s American Government Textbook, 2007 edition

allengreen's avatar

Please give one example of a successful Laissez-Faire capitalistic economy?

flyawayxxballoon's avatar

@Allen; There aren’t any, due to the fact that it’s never been tried. This was previously mentioned.

allengreen's avatar

It does not work, thank you for making my point. Laissez-Faire is a mythology perpetuated by Corporatists and then the social conservatives jump on board, against their own self interests.

flyawayxxballoon's avatar

No, there is no proof that it doesn’t work; just because there is no proof that it will work does not mean that it won’t. And it was a hugely popular idea that influenced our economy in many ways. Adam Smith was not the only man to support Laissez-Faire, he was merely the first one to publish a book on it. In fact, multitudes of early capitalist philosophers believed that if only government would not interfere, the free enterprise system would work automatically. The theory makes sense in more than one way, and is not “mythology perpetuated by Corporatists and then the social conservatives jump on board, against their own self interests.”

allengreen's avatar

If it makes so much sense, why is there no working model or example of this type of system sustaining its self?

flyawayxxballoon's avatar

Nobody bothered to try it, and that would be why. Why didn’t they try it? Have you even been paying attention to the government and politics? Do you really think that they’d be willing to try something that would make it impossible for them to get involved with more than a few exceptions?

Michael's avatar

@flyaway, I just want to point out that if you removed the words laissez faire and replaced it with “communism” you’d get exactly the same argument that hard-core leftists make with regard to Marxism. Those folks often say, “well, pure Communism was never tried. If Stalinism hadn’t gotten in the way…”


“No, there is no proof that it doesn’t work; just because there is no proof that it will work does not mean that it won’t. And it was a hugely popular idea that influenced our economy in many ways. [Karl Marx] was not the only man to support [Communism], he was merely the first one to publish a book on it.”

I think it should give you some pause that your arguments precisely mirror those of extremists on the other side of your issue. Perhaps, instead of insisting that “the theory makes sense” so why don’t we try it you should consider that the actual economic systems that currently exist are far more complicated than those under which any “pure” economic theory would work (that includes both “laissez faire and communism.”

Post Script: Have you actually read “Wealth of Nations?” (this question is not intended to be disrespectful in any way; I’m actually just interested)

flyawayxxballoon's avatar

@Michael; Thanks for pointing that out; I hadn’t even noticed. And I’m not saying that this will neccessarily work, or that it neccessarily won’t. I’m not even saying that we should try it. This question was just something to think about, as if we had chosen it instead of our economic system. I just didn’t appreciate the way the allengreen came about it with his close-minded answer. I was only trying to explain that it was an option. But anyway, thanks for that.

And no, I haven’t had a chance to read “The Wealth of Nations” yet…I actually only learned about it last week. I do, however, plan on reading it in the near future.

marinelife's avatar

@chris6137 Right. Now imaging as in this scenario that there are no protections (rather than the weak ones we have now).

@flyaway OK, so those protections I mentioned would not exist in your hypothetical state, and thus, IMHO, we definitely would not be better off.

galileogirl's avatar

Two weeks later, now that we see the “benefits” of deregulation is anybody sadder but wiser.

I have been talking about the problems related to past episodes of deregulation in my economics classes for many years and predicting an enormous problem on the horizon for the past 3 years. (I have received a couple of dozen emails from former students this week) My question is how could a high school social studies teacher see it coming and all the government economists couldn’t?

BTW when I was a Business major in the early 80’s (accounting not economics) I barely got C’s in my econ classes because I consistently pointed out that Reagonomis (including trickle down) was an untenable Ponzi scheme.

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