From Practical Economics
Adam Smith is remembered for promoting the concept of laissez faire. This is a French term used when describing government actions over a market economy. Laissez faire literally is defined as "let do" but its applied meaning is 'let (it) be" or take a hands-off approach and allow the market economy to function without government interference in its industry or business.
This pure form of capitalism is the most beneficial because the free flow of economic decisions creates the greatest degree of efficiency. Anything that interferes with freedom in economic affairs, like the government commanding the economy, will retard the system overall and inhibit growth.
Some will argue the U.S. economy functions under laissez faire principles but Walter Williams, the John M. Olin Distinguished Professor of Economics at George Mason University points out, "There are 15 cabinet departments, nine of which control various aspects of the U.S. economy. They are the Departments of: Transportation, Housing and Urban Development, Health and Human Services, Education, Energy, Labor, Agriculture, Commerce, and Interior. In addition, there is the alphabet soup cluster of federal agencies such as: the IRS, the FRB and FDIC, the EPA, FDA, SEC, CFTC, NLRB, FTC, FCC, FERC, FEMA, FAA, CAA, INS, OHSA, CPSC, NHTSA, EEOC, BATF, DEA, NIH, and NASA."
This alphabet soup of government involvement in the American economy would make Adam Smith‘s head spin like a top as he rolls over in his grave. The important role of government in the economy will be discussed in chapter 19, but the idea that free markets need to actually function free of outside mandates and commands should seem painfully obvious at this point
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Two things I would like to point out:
ReplyDelete1) The beatles would be proud ("Let (it) be").
2) A complete laissez faire economy, while very prosperous, would undoubtedly be out of control. With no regulation whatsoever the quality of all products would be comprimised. Who's to stop the tobacco companies, or the whalers, or any harmfull industry for that matter? The concept of laissez faire is beautiful, but in this world just unreliable.
Trusting the principles of free market entrepreneural capitalism is difficult....but efficient and creates economic growth thus saving live. Trusting the self interest of government "human beings" seems so easy, warm and fuzzy... the end results are inefficiency and less economic growth leading to increased suffering of the masses. You decide.
ReplyDeleteIt is in the best interest of the producer for him to make the best quality product so as to attract the consumer. This is what creates quality control; not legal semantics.
ReplyDeleteIf you want people to give you their money, you will act in ways in accordance with the rules voluntary exchange to make that happen. Remember, laissez-faire is not anarchy.
"It is in the best interest of the producer for him to make the best quality product so as to attract the consumer. This is what creates quality control; not legal semantics."
ReplyDeleteYou're correct in saying that the best quality product will be the most attractive to the consumer. What if a product appears to be the most impressive, but is actually the lesser? You don't know because you've been swayed to think this way. This kind of thing happens constantly, and if you think all products and producers are perfectly honest and truthfull then you're just ignorant. The human element is why we have regulations, wether the market is hindered or not.
The producer who "scams" the consumer will be identified and weeded out very quickly by the consumers and the market. Any illegal behavior will be handled by the rule of law, thus regulation is unnecessary, with the exception of public resources like air and water. The consumer has the freedom of choice, even if that means the choice to be a fool over and over again. Incentives tell us he will at some time learn his lesson and adjust his poor decisions.
ReplyDeleteMy Apologies.
ReplyDelete