LaissezFaire Economics The Invisible Hand Adam Smith LaissezFaire

Laissez-Faire Economics The Invisible Hand Adam Smith

Laissez-Faire = “let do” or “let them alone” Foundation of capitalism n Basic Characteristics n ¨ no government interference in the economy ¨ allows owners of business to set working conditions ¨ opposed any government effort to help the poor

Laissez-Faire Economists n n Founder: Adam Smith The leaders of the Industrial Revolution favored this approach ¨ Government interference was seen as a threat to economic growth

Natural Laws of Economics n 1. 2. 3. According to Smith there are 3 natural laws of economics Law of Self Interest – people work for their own good Law of Competition – competition forces people to make a better product Law of Supply and Demand – enough goods would be produced at the lowest possible price to meet demand

Government responsibilities included the following Maintain a strong currency ($) n Enforce contracts n Protect private property n Impose low tariffs and taxes n Maintain a strong military to protect trade n

Impact on the Working Class n During the Industrial Revolution the Laissez-Faire policies were adopted by leading capitalists. ¨ The government did not regulate working conditions ¨ The government did not oversee living conditions n As conditions worsened, new economic theories developed that supported government regulation.