Laissez faire – Definition, what it is and concept

Laissez faire is a phrase originated in France in the eighteenth century and means let them do or let them work freely.

It was used formally for the first time by Vincent de Gournay, who was an economist French, since it preceded the Physiocracy school of Economy.

Initially, it emerged in France as a rejection of all mercantilist ideas, since the workers were organized in guilds, therefore, this implied that people could not study or practice the trade or profession that interested them in a freeway; without the prior authorization of the guild.

So, the phrase Laissez-faire constitutes one of the bases of the thought of the liberalism Modern or free-market economy.

How the phrase Laissez-faire arises

Then, all this happened in France during the absolutist monarchy of Louis XIV, while he was as finance minister Jean Baptiste Colbert, who was a great promoter and defender of ideas mercantilists prevailing in France.

So, one day Colbert who cared a lot for improving the industry in France, he presented himself with a group of industrialists and I ask them: What could I do for them to help them?

Well, according to tradition, a merchant named Legendre, he bravely replied: “Laissez-nous faire!”, which for us It means to let us work; this answer was due that they were already tired and burdened by politics interventionists and centralists of the Louis XIV regime, through its Minister of Finance, Mr Colbert.

Although in a serious way the use Vincent de Gournay and later the economists of the physiocratic school of economics, especially Quesnay, who was the maximum representative of the physiocracy.

It should be noted that Adam Smith also contributed to publicizing the famous phrase in favour of freedom.

What does the phrase Laissez-faire mean for the economy

It turns out that the phrase Laissez-faire, is still very important since it involves the following:

  • The defence of freedom
    This phrase reflects a clear defence of economic freedom, which radically opposes the norms, laws and protectionism of modern statism.On the one hand, modern statism considers that State protectionist laws can create economic prosperity.

    In reality, excess controls and measures protectionists by the state, rather stifle economic activity, does not favour free competition and as a result, ends in situations uncontrollable monopoly and excessive rules and controls.

    Anyway, all this leads to discouraging the activity, productive and commercial, which finally ends with casualties in the economic growth and deterioration of people’s standard of living.

  • Promotion of the free market
    On the other hand, this phrase promotes the action of the free market as the engine that drives the actions of people who seek to make a profit, they are dedicated to offering goods and services that society requires.In the same way, the modern state believes that while more interventions are given within the economic activity will better result, but excess regulations on prices, taxes and any other type of obstacles placed causes competition to slow down.

    The less competition there is in the markets, the results are also less beneficial for both consumption and production; Well, what it does is that the scarce resources are deconsecrated and that threatens any economic objective.

Benefits of economic freedom promoted by the phrase Laissez faire

The benefits that can be obtained with the economic freedom defended by the term Laissez Faire are:

  • Less interventionist and protectionist laws
    However, since its inception the phrase Laissez faire has sought to eliminate and abolish all types of law by the state that prevents the most skilled and efficient people from using their resources better and avoiding free competition within the markets.
  • Individual interest prevails over centralized government plans
    Moreover, it goes against the plans State interventionists, due to the prevalence of natural allocation and Automatic scarce resources that are done freely and efficiently within of the market, moved by the individual interest of each participant.
  • Freedom to choose
    In addition, it allows each person to freely choose how wants to participate and cooperate within the market, through the division of job.It also encourages consumers to assume the role of deciding that entrepreneurs must remain in the market, for the superiority of the supply of goods and services they sell in the market.
  • It opposes all types of protection
    Finally, it goes against the fact that the State repeal the right to keep inefficient entrepreneurs within the market, by means of any type of incentive or privilege that allows them to remain to produce inefficiently and spending more scarce resources.

Criticisms of the economy supported by Laissez faire

There is a certain group of economists who completely reject the Laissez-faire system because in their opinion it contributes to generating greater poverty and inequality, a negative effect on the environment and on workers.

  • Inequality and poverty
    These economists believe that this system generates a lot of economic inequality because wealth is concentrated in very few hands, that is to say, that there is a minority of the rich and a large number of poor people.
  • Impairment of the environment
    Deterioration environmental is also attributed to this system, since it is thought that the entrepreneurial ambition to earn more makes finally the only thing that seeks is to reduce production costs, without worrying about the impact they may cause in the environment.
  • Worker exploitation
    Others economists argue that under this system exploitation of the
    worker, where they are paid a salary much lower than the one actually they should receive.

In conclusion, we can say that there are always people with different ideas economic, as a consequence some pronounce in favour and others against this system. What we can notice is that letting do allows the ordinary people have the ability to produce, consume and exchange within the market according to their own interests and not leaving their decisions in the hands of the government, which in this case acts as if it were a dictator.

When there is no economic freedom, the government decides what should be produced, how we have to produce and for whom to produce. This implies that the activities of production, consumption and exchange are limited or limited, according to the interests and objectives of the government, not of the common citizen. The government thus grants special privileges to the groups it intends to benefit, allowing economic resources to be deconsecrated.