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In economics, '''''laissez-faire''''' describes an environment in which transactions between private parties are free from [[State (polity)|state]] intervention, including restrictive regulations, taxes, tariffs and enforced monopolies.

The phrase ''laissez-faire'' is [[French language|French]] and literally means "let do", but it broadly implies "let it be", or "leave it alone."

== Origins of the Phrase ==

According to historical legend, the phrase stems from a meeting in about 1680 between the powerful French finance minister [[Jean-Baptiste Colbert]] and a group of French businessmen led by a certain M. Le Gendre. When the eager [[mercantilist]] minister asked how the French state could be of service to the merchants and help promote their commerce, Le Gendre replied simply "''Laissez-nous faire''" ("Leave us be", lit. "Let us do").  

The anecdote on the Colbert-Le Gendre meeting was related in a 1751 article in the ''Journal Oeconomique'' by the French minister and champion of free trade, [[René-Louis de Voyer de Paulmy, marquis d' Argenson|René de Voyer, Marquis d'Argenson]] - which happens to also be the phrase's first known appearance in print.<ref>M. d'Argenson, "Lettre au sujet de la dissertation sur le commerce du marquis de Belloni', Avril 1751, ''Journal Oeconomique'' [http://books.google.com/books?id=k4ABAAAAYAAJ&vq=morbleu&dq=editions%3ANYPL33433007441680&lr&pg=RA3-PA111#v=onepage&q&f=false p.111]. See A. Oncken, ''Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden'', 1866</ref>  Argenson himself had used the phrase earlier (1736) in his own diaries, in a famous outburst:

 {{quote|''Laissez faire, telle devrait être la devise de toute puissance publique, depuis que le monde est civilisé&nbsp;... Détestable principe que celui de ne vouloir grandir que par l'abaissement de nos voisins! Il n'y a que la méchanceté et la malignité du coeur de satisfaites dans ce principe, et l’intérêt y est opposé. Laissez faire, morbleu! Laissez faire!!'' <ref>as quoted in J.M. Keynes, 1926, "The End of Laissez Faire".  Argenson's ''Mémoirs'' were published only in 1858, ed. Jannet, Tome V, p.362.  See A. Oncken (''Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden'', 1866)</ref>

(Trans: "Leave it be, that should be the motto of all public powers, as the world is civilized ... That we cannot grow except by lowering our neighbors is a detestable notion! Only malice and malignity of heart is satisfied with such a principle and our (national) interest is opposed to it. Leave it be, for heaven's sake! Leave it be!)}}

The ''laissez faire'' slogan was popularised by [[Vincent de Gournay]], a French intendant of commerce in the 1750s. Gournay was an ardent proponent of the removal of restrictions on trade and the deregulation of industry in France. Gournay was delighted by the Colbert-LeGendre anecdote,<ref>According to J. [[Anne-Robert-Jacques Turgot, Baron de Laune|Turgot]]'s "Eloge de Vincent de Gournay," '' Mercure'', August, 1759 (repr. in ''Oeuvres of Turgot'', vol. 1 [http://books.google.com/books?id=5KQALAckPr8C&dq=Eloge%20de%20Gournay&pg=PA288#v=onepage&q&f=false p.288].</ref> and forged it into a larger maxim all his own: "''Laissez faire et laissez passer''" ('Let do and let pass'). His motto has also been identified as the longer "''Laissez faire et laissez passer, le monde va de lui même!''" ("Let do and let pass, the world goes on by itself!"). Although Gournay left no written tracts on his economic policy ideas, he had immense personal influence on his contemporaries, notably the [[Physiocrats]], who credit both the ''laissez-faire'' slogan and the doctrine to Gournay.<ref>Gournay was credited with the phrase by [[Jacques Turgot]] ("Eloge a Gournay", ''Mercure'' 1759), the [[Victor de Riqueti, marquis de Mirabeau|Marquis de Mirabeau]] (''Philosophie rurale'' 1763 and ''Ephémérides du Citoyen'', 1767.), the [[Comte d'Albon]] (,"Éloge Historique de M. Quesnay", ''Nouvelles Ephémérides Économiques'', May, 1775, p.136-7. ) and [[Pierre Samuel du Pont de Nemours|DuPont de Nemours]] (Introduction to ''Ouevres de Jacques Turgot'', 1808–11, Vol. I, p.257 and p.259 (Daire ed.)) among others</ref>

Before d'Argenson or Gournay, [[Pierre Le Pesant, sieur de Boisguilbert|P.S. de Boisguilbert]] had enunciated the phrase "on laisse faire la nature" ('let nature run its course').<ref>"Tant, encore une fois, qu'on laisse faire la nature, on ne doit rien craindre de pareil", P.S. de Boisguilbert, 1707, ''Dissertation de la nature des richesses, de l'argent et des tributs''.</ref>   D'Argenson himself, during his life, was better known for the similar but less-celebrated motto "''Pas trop gouverner''" ("Govern not too much").<ref>DuPont de Nemours, ''op cit'', p.258. Oncken (''op.cit'') and Keynes (''op.cit''.) also credit the Marquis d'Argenson with the phrase "''Pour gouverner mieux, il faudrait gouverner moins''" ("To govern best, one needs to govern less"), possibly the source of the famous "That government is best which governs least" motto popular in American circles, attributed variously to [[Thomas Paine]], [[Thomas Jefferson]] and [[Henry Thoreau]].</ref> But it was Gournay's use of the 'laissez-faire' phrase (as popularized by the Physiocrats) that gave it its cachet. 

In England, a number of "free trade" and "non-interference" slogans had been coined already during the 17th century. But the French phrase ''laissez faire'' gained currency in English-speaking countries with the spread of Physiocratic literature in the late 18th century.  The Colbert-LeGendre anecdote was relayed in [[George Whatley]]'s 1774 ''Principles of Trade'' (co-authored with [[Benjamin Franklin]]) - which may be the first appearance of the phrase in an English language publication.<ref>Whatley's ''Principles of Trade'' are reprinted in ''Works of Benjamin Franklin, Vol.2'', [http://books.google.com/books?id=C2QUAAAAYAAJ&dq=Benjamin%20Franklin%20%22Principles%20of%20Trade%22&pg=PA401#v=onepage&q&f=false p.401]</ref>

Notably, [[Classical economics|Classical economists]], such as [[Thomas Malthus]], [[Adam Smith]]<ref name=asoae /> and [[David Ricardo]], did not use the phrase. [[Jeremy Bentham]] used the term, but it was probably [[James Mill]]'s reference to the "''laissez-faire''" maxim (together with "''pas trop gouverner''") in an 1824 entry for the ''Encyclopædia Britannica'' that really brought the term into wider English usage. With the advent of the [[Anti-Corn Law League]], the term received much of its (English) meaning.<ref>{{cite journal|author=Abbott P. Usher et al.|title=Economic History—The Decline of Laissez Faire|year=1931|journal=American Economic Review|volume=22|issue=1, Supplement|pages=3–10}}</ref> 

[[Adam Smith]] first used the metaphor of an "[[invisible hand]]" in his book ''[[The Theory of Moral Sentiments]]'' to describe the unintentional effects of economic self organization from economic self interest.<ref>Andres Marroquin, ''Invisible Hand: The Wealth of Adam Smith'', The Minerva Group, Inc., 2002, ISBN 1410202887, page 123.</ref> Some have characterized this metaphor as one for ''laissez-faire'',<ref>[http://www.google.com/books?id=zAIar8Ee80QC&lpg=PA122&dq=laissez%20faire%20invisible%20hand&pg=PA122#v=onepage&q=laissez%20faire%20invisible%20hand&f=false ''The mathematical century: the 30 greatest problems of the last 100 years'' (2006) Piergiorgio Odifreddi, Arturo Sangalli, Freeman J Dyson, p. 122]</ref> but Smith never actually used the term himself.<ref name=asoae>Roy C. Smith, Adam Smith and the Origins of American Enterprise: How the Founding Fathers Turned to a Great Economist's Writings and Created the American Economy, Macmillan, 2004, ISBN 0312325762, pp. 13–14.</ref>

==History of laissez-faire debate==
During the [[Han Dynasty|Han]], [[Tang Dynasty|Tang]], [[Song Dynasty|Song]], and [[Ming Dynasty|Ming]] dynasties, Chinese scholar-officials would often debate about the interference the government should have in the economy, such as setting monopolies in lucrative industries and instating price controls. Such debates were often heated with Confucian factions tending to oppose extensive government controls and "Reform" factions favoring such moves. During the Han and Tang, emperors sometimes instated government monopolies in times of war, and abolished them later when the fiscal crisis had passed. Eventually, in the later Song and Ming dynasties, state monopolies were abolished in every industry and were never reinstated during the length of that dynasty, with the government following laissez-faire policies. During the Manchu Qing Dynasty, [[Government monopoly|state monopolies]] were reinstated, and the government interfered heavily in the economy; many scholars believe this prevented China from developing capitalism.<ref>Li Bo and Zheng Yin, 5000 years of Chinese history, Inner Mongolian People's publishing corp , ISBN 7-204-04420-7, 1017</ref>

===Europe===
In Britain, in 1843, the newspaper ''[[The Economist]]'' was founded, and became an influential voice for ''laissez-faire'' capitalism.<ref>{{cite journal|author=Scott Gordon|title=The London Economist and the High Tide of Laissez Faire|year=1955|journal=Journal of Political Economy|volume=63|issue=6|pages=461–488|doi=10.1086/257722}}</ref>  In response to the [[Irish famine]] of 1846–1849, in which over 1.5 million people died of starvation, they argued that for the government to supply free food for the Irish would violate natural law.  [[Clarendon]], the Lord Lieutenant of Ireland, wrote, "I don't think there is another legislature in Europe that would disregard such suffering."<ref>James L. Richardson, ''Contending Liberalisms in World Politics'', 2001, Lynne Rienner Publishers, ISBN 1555879152</ref>   The group calling itself the [[Manchester Liberalism|Manchester Liberals]], to which [[Richard Cobden]] and [[John Bright]] belonged, were staunch defenders of free trade, and their work was carried on, after the death of Richard Cobden in 1866, by ''The Cobden Club''.<ref>{{cite web|title=London Clubs in the Late Nineteenth Century|url=http://www.nuff.ox.ac.uk/economics/history/paper28/28taddeiweb1.pdf|format=PDF|author=Antonia Taddei|year=1999|accessdate=2008-12-30}}</ref>  In 1867, a free trade treaty was signed between Britain and France, after which several of these treaties were signed among other European countries. 

British ''laissez-faire'' was not absolute.  The [[United Kingdom company law]],<ref name="walker">{{cite journal|title=Laissez-faire, Collectivism And Companies Legislation In Nineteenth-century Britain|last=Walker|first=S.P.|journal=The British Accounting Review|volume=28|pages=305–324|year=1996|publisher=Elsevier|doi=10.1006/bare.1996.0021|issue=4}}</ref> the [[Limited Liability Act 1855]], and the [[Joint Stock Companies Act 1856]] were exceptions.

''Laissez-faire'' policy was never absolute in any nation, and at the end of the 19th century, European countries again took up some economic protectionism and interventionism. France for example, started cancelling its free trade agreements with other European countries in 1890. Germany's [[protectionism]] started (again) with a December 1878 letter from [[Otto von Bismarck|Bismarck]], resulting in the iron and rye [[tariff]] of 1879.

===United States===
[[File:Marriner S. Eccles Federal Reserve Board Building.jpg|thumb|200px|The [[Federal reserve]], headquarters in [[Eccles Building]] is criticized by laissez-faireists as the cause of [[business cycles]].]]
Although the period before the [[New Deal]] was notable for the limited extent of the federal government, the [[Austrian School]] suggest that there was a considerable degree of government intervention in the economy—particularly after the 1860s. Notable examples of government intervention in the period prior to the Civil War include the establishment of the [[First Bank of the United States]] and [[Second Bank of the United States]] as well as various protectionist measures (e.g., the [[tariff of 1828]]). Several of these proposals met with serious opposition, and required a great deal of horse trading to be enacted into law. For instance, the First National Bank would not have reached the desk of President [[George Washington]] in the absence of an agreement that was reached between [[Alexander Hamilton]] and several southern members of Congress to locate the capital in the [[District of Columbia]]. In contrast to Hamilton and the Federalists was the opposing political party the Democratic-Republicans. 

Most of the early opponents of ''laissez-faire'' capitalism in the United States subscribed to the [[American School (economics)|American School]]. This school of thought was inspired by the ideas of Alexander Hamilton, who proposed the creation of a [[First National Bank|government sponsored bank]] and increased tariffs to favor northern industrial interests. Following Hamilton's death, the more abiding protectionist influence in the antebellum period came from [[Henry Clay]] and his ''[[American System (economic plan)|American System]]''.

In the mid-19th century, the [[United States]] followed the [[Whig Party (United States)|Whig]] tradition of [[economic liberalism]], which included increased state control, regulation and [[macroeconomic]] development of [[infrastructure]].<ref name=guelzo>{{Cite book|first=Allen C.|last=Guelzo|title=Abraham Lincoln: Redeemer President|isbn=0-8028-3872-3|year=1999|url=http://www.questia.com/PM.qst?a=o&d=99466893|publisher=W.B. Eerdmans Pub. Co|location=Grand Rapids, Mich.|postscript=<!--None-->}}</ref> [[Public works]] such as the provision and regulation [[transportation]] such as railroads took effect. The [[Pacific Railway Acts]] provided the development of the [[First Transcontinental Railroad]].<ref name="guelzo"/> In order to help pay for its war effort in the [[American Civil War]], the [[United States government]] imposed its first personal [[income tax]], on August 5, 1861, as part of the [[Revenue Act of 1861]] (3% of all incomes over US $800; rescinded in 1872).

Following the Civil War, the movement towards a mixed economy accelerated with even more [[protectionism]] and [[government regulation]]. In the 1880s and 1890s, significant tariff increases were enacted (see the [[McKinley Tariff]] and [[Dingley Tariff]]). Moreover, with the enactment of the [[Interstate Commerce Act of 1887]], the [[Sherman Anti-trust Act]], the federal government began to assume an increasing role in regulating and directing the country's economy.

The [[Progressive Era]] saw the enactment of even more controls on the economy, as evidenced by the Wilson Administration's [[New Freedom]] program.

Following [[World War I]] and the [[Great Depression]], [[Keynesian economics|Keynesian policies]] turned the state into a [[mixed economy]]. The United States, in the 1980s, for example, sought to protect its automobile industry by "voluntary" export restrictions from Japan.<ref>{{cite journal|author=Robert W. Crandall|year=1987|title=The Effects of U.S. Trade Protection for Autos and Steel|journal=Brookings Papers on Economic Activity|volume=1987|issue=1|pages=271–288|doi=10.2307/2534518|url=http://jstor.org/stable/2534518|publisher=Brookings Papers on Economic Activity, Vol. 1987, No. 1}}</ref> [[Pietro S. Nivola]] wrote in 1986:{{quote|By and large, the comparative strength of the dollar against major foreign currencies has reflected high U.S. interest rates driven by huge federal budget deficits. Hence, the source of much of the current deterioration of trade is not the general state of the economy, but rather the government's mix of fiscal and monetary policies– that is, the problematic juxtaposition of bold tax reductions, relatively tight monetary targets, generous military outlays, and only modest cuts in major entitlement programs. Put simply, the roots of the trade problem and of the resurgent protectionism it has fomented are fundamentally political as well as economic.<ref>{{cite journal|author=Pietro S. Nivola|year=1986|title=The New Protectionism: U.S. Trade Policy in Historical Perspective|journal=[[Political Science Quarterly]]|volume=101|issue=4|pages=577–600|doi=10.2307/2150795|url=http://jstor.org/stable/2150795|publisher=Political Science Quarterly, Vol. 101, No. 4}}</ref>}}

==See also==
{{Wiktionary|laissez faire}}
{{colbegin}}
* [[Anarcho-capitalism]]
* [[Capitalism]]
* [[Capitalism: The Unknown Ideal]] by [[Ayn Rand]]
* [[Classical liberalism]]
* [[Criticisms of capitalism]]
* [[Economic liberalism]]
* [[Free market]]
* [[Libertarianism]]
* [[Perspectives on Capitalism]]
* [[Market anarchism]]
* [[Market fundamentalism]]
* [[Minarchism]]
* [[Objectivism (Ayn Rand)|Objectivism]]
* [[Ordoliberalism]]
* [[Positive non-interventionism]]
{{colend}}

==References==
{{Reflist|colwidth=30em}}

==Bibliography==
* {{cite journal|author=Brebner, John Bartlet|year=1948|title=Laissez Faire and State Intervention in Nineteenth-Century Britain|journal=Journal of Economic History|volume=8|pages=59–73}}
* {{cite journal|author=[[Irving Fisher|Fisher, Irving]]|year=1907|month=January|title=Why has the Doctrine of Laissez Faire been Abandoned?|journal=[[Science (journal)|Science]]|volume=25|issue=627|pages=18–27|doi=10.1126/science.25.627.18|pmid=17739703}}
* {{cite journal|author=[[Frank William Taussig|Taussig, Frank W.]]|year=1904|title=The Present Position of the Doctrine of Free Trade|journal=[[American Economic Association|Publications of the American Economic Association]]|volume=6|issue=1|pages=29–65}}
</div>

==Further reading==
* {{PDFlink|[http://hsozkult.geschichte.hu-berlin.de/daten/2005/gerlach_christian_wu-wei.pdf Wu-Wei in Europe. A Study of Eurasian Economic Thought]|773&nbsp;KB}} by Christian Gerlach, London School of Economics – March 2005
*[http://www.panarchy.org/keynes/laissezfaire.1926.html John Maynard Keynes, The end of laissez-faire (1926)]

{{DEFAULTSORT:Laissez-Faire}}
[[Category:Ideologies]]