Laissez Faire Capitalism

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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In its purest form, laissez-faire capitalism is the same thing as a pure market economy.  This is an economy in which the government does not take any part in managing the economy.  In such an economy, there would be no such things as, for example, minimum wage laws or workplace safety laws.  All decisions would be made on a purely economic basis.

In American history, the term "laissez-faire capitalism" has been used to refer to the state of affairs before the Progressive Era and especially the New Deal inserted government into more aspects of the economy.  However, the US economy has never been truly laissez-faire.  Even in the allegedly laissez-faire period, the government intervened on behalf of companies (doing things like breaking up strikes) and did things (subsidizing railroads) to try to boost the economy.

So a laissez-faire economy would be one in which there would be no government involvement in the economy, but such a situation cannot really exist in the real world.

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thisuserhasmadeabadusername | Student, Grade 10 | (Level 1) Valedictorian

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It is based on Adam Smith's Invisible hand, that the market self-regulates itself without the need of government regulations since consumers and producers are rational maximizers, and will take measures to maximize profit or save money and/or capital.

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fact-finder | (Level 3) Valedictorian

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Laissez-faire capitalism is an economic system. Capitalism involves the ownership of property by individuals. The individual's goal is to use this property, or capital (buildings, machines, and other equipment used to produce goods and services), to create income. Individuals and companies compete with one another to earn money. This competition between companies determines the amount of goods produced and the prices company owners may demand for these goods. The French term laissez-faire literally means "to let people do as they wish." Thus, supporters of laissez-faire capitalism do not want the government to interfere in business matters, or if governments do involve themselves in business matters, to keep government influence to a minimum. Although the economies of the United States and many other industrialized nations are highly capitalistic, there is no pure capitalist system because national governments regulate business to some degree.

Further Information: Buchanan, James M., and Dwight R. Lee. "Having It Both Ways." Forbes. February 27, 1995, p. 87; "Laissez-Faire." Funk and [Online] Available http://www.funkand, October 30, 2000; Reisman, George. "Toward the Establishment of Laissez-Faire Capitalism." Capitalism: A Treatise on Economics. [Online] Available, October 30, 2000.