laissez-faire
laissez-faireA policy of complete non-intervention by governments in the economy, leaving all decisions to the market. If there were perfect markets everywhere, with no externalities, and we were indifferent to income distribution, laissez-faire would be a first-best policy. In fact there are numerous market imperfections and many externalities, and there is considerable concern about income distribution. Laissez-faire cannot seriously be defended as first best. There are however government failures as well as market failures, and one might attempt to defend laissez-faire as a second-best policy. Most economists nowadays accept a major role for centralized policy in enforcing competition, regulating externalities, and trying to correct some of the income inequalities engendered by free markets.
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