DEFINITION: The phrase “laissez-faire” is shorthand for a type of economic theory which advocates minimal government involvement in the economy.
The phrase, which may be loosely translated as “let it be” or “leave it alone,” presumes that it is the free activity of individuals which leads to the optimal performance of an economy, and not government supervision or regulation.
The concept of laissez-faire lies at the heart of free-market capitalism in all its forms.
ETYMOLOGY: The French phrase “laissez-faire” [literally, “let do”] was popularized in the 1750s by Vincent de Gournay, a French public official and leader of the Physiocrat school of economic thought.
Gournay is said to have taken the phrase from a 1751 discussion between French Controller-General of Finance, Jean-Baptiste Colbert, and a delegation of businessmen. Colbert is supposed to have asked: “How can the government help you?” The leader of the businessmen’s delegation is supposed to have answered: “Laissez-nous faire” [“Leave us alone”].
The French word “laissez” is the second-person plural, imperative mood of the verb laisser, meaning “to let,” “to allow,” or “to leave [alone].” Thus, laissez means, roughly, “let it be!” or “leave it alone!”
The verb “laisser” derives, via Middle French, from Old French lesser, meaning “to let” or “to allow,” which, in turn, derives from the Latin verb laxō, laxare, meaning “to unfasten,” “to relax,” or “to release.” The Latin word is also akin to Old High German lāzan, meaning “to let,” “to let go,” or “to leave.”
The French verb “faire” is in the infinitive form and means “to make” or “to do.” It derives, via Middle French, from Old French faire, which derives (presumably) from the Vulgar Latin infinitive *fare (the asterisk indicates the form is not actually attested), which is an elision of the infinitive form of the classical Latin verb facio, facēre, meaning “to make” or “to do.”
USAGE: Laissez-faire economics presupposes the belief that a competitive free market embodies an inherent natural order which always leads to optimal results for an economy, considered overall.
Laissez-faire may be thought of as the logical complement to the invisible hand: it is essentially a prescription to rulers saying, in effect, “Leave the invisible hand alone to do its work.”
Proponents of laissez-faire economics contend that government intervention is not only unnecessary to achieve optimal economic performance, it is actually counterproductive, seeing that any intervention on the part of the government is bound to cause a deviation from the optimal equilibrium achieved by the invisible hand, resulting in a less-than-best-possible outcome.
According to the theory behind the concept of laissez-faire, such a sub-optimal outcome will be the inevitable result of any and all efforts on the part of the government to shape or steer the economy in some desired direction, by means of, for example, such popular measures as subsidies to failing industries, minimum wage laws, corporate taxes, and tariffs, duties, and other trade barriers.
From a laissez-faire perspective, such government interference is tantamount to rewarding economic failure and punishing success. In other words, government interference in the economy creates an inversion of the normal incentive structure.
As such, it is a sure-fire recipe for economic stagnation, social malaise, and political resentment, as the government makes the people unfulfillable promises of a radiant economic future which raise unrealistic expectations that are bound to be dashed.
The laissez-faire perspective is basically the same as that of nineteenth-century classical liberal political economy and, later, that of Austrian economists, libertarians, and neo-liberals.
All of these schools of thought view the role of the state as that of providing a bare minimum of essential services, which basically boil down to the following three governmental functions, which are the only ones viewed by strong laissez-faire advocates as legitimate:
- A military function of safeguarding the country’s national security
- A police function of enforcing the rule of law, especially with respect to the safety of citizens’ lives and property
- A public service function of providing for public goods—such as a postal service, roads and bridges, and other infrastructure—which might not attract private investment, yet which most citizens would view as being for the benefit of all
Much of the content of the political discourse of a modern developed nation consists of debate about what the proper limits of such “public goods” ought to be, with “conservatives” essentially arguing that as few things as possible ought to count as “public goods” and “liberals” arguing that a great many things (or essentially anything at all) ought to count as “public goods.”