1 Answer | Add Yours
Classical economics can always be used to defend laissez faire government policies. This is because classical economics is based on the idea that government should stay out of the markets.
According to classical economics, the most efficient outcomes always happen when markets are left to function on their own. When this happens, supply and demand meets at an equilibrium price -- there is no shortage and no surplus.
However, if governments interfere in the markets, shortages or surpluses occur. For example, if the government forces railroads to lower their prices, there will be a shortage of railroad shipping. This will occur because people will want to ship more things (because the price is cheap) and railroads will want to provide less shipping space (because they don't make enough when prices are low). In this case, there is more demand than supply and you have a shortage.
So people could make arguments like that to defend laissez faire -- they could argue that government involvement in the economy always leads to bad results.
We’ve answered 318,934 questions. We can answer yours, too.Ask a question