Definition
Laissez-faire capitalism is an economic system in which the government does not interfere in the market.
It is the idea that the economy works best when individuals and businesses are free to make their own choices, without government restrictions.
Functions Of Laissez-Faire Economy
Prices are set by supply and demand, not by the government.
Businesses are free to operate however they choose.
There are no subsidies, no regulations, and no government ownership of industries.
Principles Of The Economy
Individual Freedom -: People are free to own property, start businesses, and compete in the market. Success depends on skill, innovation, and effort.
Invisible Hand -: A term made famous by economist Adam Smith. It refers to the idea that individuals pursuing their own self-interest will unintentionally help society. For example, a baker who wants to earn money ends up feeding the community.
No Government Control -: The government doesn’t set prices, control wages, or interfere in business operations. It may only protect private property, enforce contracts, and provide law and order.
Pros And Cons Of Laissez-Faire Economy
PROS -: CONS -:
Encourages innovation and entrepreneurship Can lead to monopolies
Efficient allocation of resources May result in exploitation of workers
Economic growth through competition No protection for the poor or environment
Less bureaucracy Inequality can rise sharply
