Laissez-Faire Economics Adam Smith Thomas Malthus David Ricardo

Laissez-Faire = “let do” or “let them alone” Foundation of capitalism Basic Characteristics no government interference in the economy allows owners of business to set working conditions opposed any government effort to help the poor

Laissez-Faire Economists Founder: Adam Smith Thomas Malthus and David Ricardo also believed in no government interference. The leaders of the Industrial Revolution favored this approach Government interference was seen as a threat to economic growth

Natural Laws of Economics According to Smith there are 3 natural laws of economics Law of Self Interest – people work for their own good Law of Competition – competition forces people to make a better product Law of Supply and Demand – enough goods would be produced at the lowest possible price to meet demand

Government responsibilities included the following Maintain a strong currency ($) Enforce contracts Protect private property Impose low tariffs and taxes Maintain a strong military to protect trade

Impact on the Working Class During the Industrial Revolution the Laissez-Faire policies were adopted by leading capitalists. The government did not regulate working conditions The government did not oversee living conditions As conditions worsened, new economic theories developed that supported government regulation.