Was Adam Smith laissez-faire?
What did it mean that Adam Smith was laissez-faire? This asks another question, did Adam Smith really support an economy free from government interference? Generally yes, but there is more to the story and it is worth trying to understand more on the subject. The most important thing is to understand why Adam Smith believed, what he believed in. He believed a government that leaves people alone to live their lives according to their own judgment is the best for all.
The reasoning behind this is the collective unconsciousness of society moves at the speed of light to shift and respond to the patterns of consumer demand. What is valued today will change and people will intuitively pick up on societies demands and bring to market those needs.
Capitalism does not have to be bad. Adam Smith recommended laissez-faire with a government that facilitates the development of the human mind and promotes the peace, however, not one that has its hands the market.
The core tenets Laissez-faire
- The individual is the basic unit and mover in economics
- Individual rights and freedoms are to be protected, this is the role of government
- The natural order of things in nature, the physical world, and economics are self-regulating creating a harmony
- Watch corporations for the disruption of the spontaneous order
Spontaneous order is what happens when you leave people alone—when entrepreneurs… see the desires of people… and then provide for them. They respond to market signals, to prices. Prices tell them what’s needed and how urgently and where. And it’s infinitely better and more productive than relying on a handful of elites in some distant bureaucracy. – Lawrence Reed
For everyone protesting capitalism and free-market economics, consider the good it does. As in this illustration above, I am incentivized by the market to grow organic vegetables. How is that bad? How is that not enlightened self-interest? It benefits society as a whole. It is not the cold-hearted pedantic Objectivism of Ayn Rand, nor the greed of dishonest Wall Street bankers, nor the bloated ludicrous Washington, DC establishment, (like Panem in the Hunger Games), but rather, you and I left to our own creative expressions to take things to market.
The government? They move at a snail’s pace and complicate things. Laissez-faire economics, in contrast, draws on the intelligence and creativity of individuals in aggregate. A free market that has limited, but some government.
Adam Smith’s laissez-faire economics meant:
When people are given the freedom to be the best they can be, the result is the rich and the poor have a better economic situation. Yes, the poor are the ones who win in the free trade capitalism of Adam Smith. The purpose of government is not to make everyone equal. It can not happen, but rather give everyone the freedom to make choices on their own enlightened self-interest.
The philosophers of the enlightenment believed that the role of government was to protect the rights of the individual so people and society as a whole would be happier. After all, happiness is the goal of life. In my heart of hearts, I truly believe in the ideals of the enlightenment. It was a great time for humanity and philosophy. I believe in the innate goodness of men. I believe that all people have the ability to achieve great things in this world, everyone.
- The only two things that can hold you back are wrong thinking or wrong government.
It believed that men basically have the same innate ability to do well in life if given a chance. This means freedom. After all, I am an American who has to spend a good part of my life in Eastern Europe. I can compare two economies, one that is free and one that is not.
In contrast, John Maynard Keynes in his essay The End of Laissez-faire in 1926 believed the market can not regulate everything and the government should be involved on a case-by-case basis. Keynesian economics has caused uncounted suffering of people because it has been the playbook for government in the 20th and 21st century discounting the ideas of Adam Smith.
What does this have to do with laissez-faire?
With this freedom from the burden of government people strive to be the best they can be, individuals will be happier and so will society.
The poor will become middle class relatively fast with laissez-faire.
Laissez-faire means ‘let do’ translated from French or ‘let it be’. Adam Smith never uses the term in his Wealth of Nations nor in his The Theory of Moral Sentiments. This is surprising as it often connected to Adam Smith. I think simply because it was a French expression. However, there is another reason.
I think people confuse his idea of the invisible hand with laissez-faire. The invisible hand is more about the unintended consequences of individual action on society as a whole. While laissez-faire is a philosophy where the government is hands-off business. And does not compete, regulate, tax business excessively. Similar ideas but a slightly different focus. The classical liberal thinkers like Adam Smith wanted to answer the question of how to maximizes your happiness.
The origins of laissez-faire
This French word import dates back several hundred years. It comes from M. Le Gendre when he and some French business leaders were asked my the French Mercantilist economic minister what the government could do to help their business. His reply was laissez-faire, lets us be. Every job creator knows the best thing government can do is let the markets work. Vincent de Gournay was the French 1750s version of Ronald Reagan. The French commerce minister fought hard against encroaching government regulation. He tried to deregulate business and the result was positive. We need this today.
Leave it to itself has been the proper motto of public powers since the dawn of civilization. Appalling is the principle of seeking glory solely by debasing our neighbors. In it are but the malice and spitefulness of heart typical of fat cats; the public interest lies elsewhere. Leave it to itself, for the love of God. Leave it. – Colbert–Le Gendre – Journal économique 1751
In English it first appears two years before Wealth of Nations, in 1774 in 1774, Principles of Trade by George Whatley, he co-authored the book with Benjamin Franklin. The first classical economics to use the term was Jeremy Bentham.
What does Adam Smith have to do with laissez-faire?
It is interesting that Adam smith does not use this term once in any of his works. Smith was describing something similar, but more radical and detailed than the simple notion of ‘let us be’. Adam Smith was making an argument that when government protects individuals freedoms. This is classical liberalism. I rather than business, societies will thrive, people will be happy.
Wealth of Nations Adam Smith laissez-faire economics did not mean:
- No government
- Taking advantage of workers
Adam Smith is one of the most referenced economists of all time, but I think many people use his thinking to support their own views on Political economy without reading him. I have created a free e-book of Adam Smith’s wealth of nations. This book was not written for the capitalist class, but for all people especially the poor. I created a free e-book that has his complete Wealth of Nations for free to download if you want to read him directly and read about laissez-faire economics first hand.