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Laissez-faire (/ ˌ l ɛ s eɪ ˈ f ɛər / LESS-ay-FAIR, from French: laissez faire [lɛse fɛːʁ] ⓘ, lit. ' let do ' ) is a type of economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies or regulations ).
The system works best when there is a complementary relationship between one person's needs and another person's desires, and so trade restrictions place an unnatural barrier to achieving one's goals. Laissez-faire was popularized by physiocrat Vincent de Gournay who is said to have adopted the term from François Quesnay's writings on China. [10]
Although laissez-faire has been commonly associated with capitalism, there is a similar economic theory associated with socialism called left-wing or socialist laissez-faire, also known as free-market anarchism, free-market anti-capitalism and free-market socialism to distinguish it from laissez-faire capitalism.
The theoretical alternative to Keynesianism was more compatible with laissez-faire and emphasised individual rights and absence of government intervention. Market-oriented solutions gained increasing support in the Western world, especially under the leadership of Ronald Reagan in the United States and Margaret Thatcher in the UK in the 1980s.
[A]t the center of classical liberal theory [in Europe] was the idea of laissez-faire. To the vast majority of American classical liberals, however, laissez-faire did not mean no government intervention at all. On the contrary, they were more than willing to see government provide tariffs, railroad subsidies, and internal improvements, all of ...
Historian Kathleen G. Donohue argues that classical liberalism in the United States during the 19th century had distinctive characteristics as opposed to Britain: "[A]t the center of classical liberal theory [in Europe] was the idea of laissez-faire.
Friedman argues that laissez-faire government policy is more desirable than government intervention in the economy. Governments should aim for a neutral monetary policy oriented toward long-run economic growth, by gradual expansion of the money supply. He advocates the quantity theory of money, that general prices are determined by money ...
He believed that laissez-faire capitalism is the only system that allows individuals to express their intersubjective appraisals of goods and services in an open market, thereby creating a nexus of price signals based on the relative exchange ratios between goods.