Laissez-faire Elianny

Laissez-Faire

Economicsby Elianny Feliz

Laissez-Faire Economics

Introduction

• Many thinkers and economists tried to understand the staggering changes taking place in the early Industrial Age. That's why they looked for natural laws to explain the world of business and economics.

• Their ideas would influence governments down to the present. Among the most influential schools of thought were laissez-faire economics, utilitarianism, and socialism.

• Many thinkers and economists tried to understand the staggering changes taking place in the early Industrial Age. That's why they looked for natural laws to explain the world of business and economics.

• Their ideas would influence governments down to the present. Among the most influential schools of thought were laissez-faire economics, utilitarianism, and socialism.

Adam Smith and Laissez-Faire Economics

• The main proponent of laissez-faire economics was Adam Smith, who asserted that a free market, or unregulated exchange of goods and services, would come to help everyone, not just the rich.

• The free market, Smith said, would produce more goods at lower prices, making them affordable to everyone.

Thomas Mathus and laissez-Faire

• Like Smith, Thomas Malthus was a laissez-faire thinker whose writings influenced economic ideas for generations.

• In his 1798 book An Essay on the Principle of Population, he grimly predicted that poverty was unavoidable because the population was increasing faster than the food supply.

• He thought that as long as population kept increasing, the poor would suffer.

• He thus urged families to have fewer children and discouraged charitable handouts and vaccinations.

• During the early 1800s, with industrial workers living and working in harsh conditions, many people accepted Malthus’s bleak view.

• His view was proved wrong, however.

• Although the population boom did continue, the food supply grew even faster

• As the century progressed, living conditions in the Western world slowly improved, and people eventually did begin to have fewer children.

• By the 1900s, population growth was no longer a problem in the West, but it did continue to afflict many nations elsewhere.

Ricardo and the "Iron Law"

• Another influential British laissez-faire economist, David Ricardo, dedicated himself to economic studies after reading Smith’s The Wealth of Nations.

• Like Malthus, Ricardo claimed that the poor had too many children and had little chance to escape poverty.

• In his “Iron Law of Wages,” Ricardo noted that when wages were high, families had more children. But more children increased the supply of labor, which led to lower wages and higher unemployment.

Conclusion

• Neither Malthus nor Ricardo were cruel men. Still, both opposed any government help for the poor.

• In their view, the best cure for poverty was not government relief but the unrestricted “laws of the free market.”

• They felt that individuals should be left to improve their lot through thrift, hard work, and limiting the size of their families.

Thank you