Scucca

Henry (2008, The Ideology of the Laissez Faire Program, Journal of Economic Issues, Vol 42, pp 209-224) writes:

Over the last 35 years, a free market, laissez faire program has increasingly dominated perceptions as to what constitutes correct economic theory and policy. Most adherents of this program trace its origins to Adam Smith, and claim that its dominant position is the result of superior theory. The argument here is that Adam Smith is not the theoretical ancestor of modern laissez faire economics, and that there are fundamental differences between Smith's position on laissez faire and that of conventional neoclassical theory. A difference between "soft" and "hard" laissez faire is made, where Smith represents the former position; neoclassical theory the latter. Further, and more important, it is argued that the current laissez faire program is an outgrowth of a political program instituted in the 1930's and financially supported in the present era by conservative foundations to promote an ideological framework that permits the development of specific governmental (and non-governmental) actions.

If laissez-faire policies are indeed a corruption spawned by conservative lobbying, will it be a blip that is eventually displaced by the market itself?

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rathi

Laissez today is simply an oversimplification of the requirements needed for a healthy market. The healthy market has competition or low-barriers to entry. Adam Smith recognized that in his day, parliament used its political power to create monopolies that benefited themselves at the economies expense. He spoke out against such government interference of being harmful to economy, and he was right. However, there are other groups that also seek to negatively impact a market. Corporations have also used their wealth and organization to similarly interfere with markets. Adam Smith never wrote about them, because corporations as powerful independent organizations didn't exist in his day. Today, his message about promoting an open market has been lost, and been replaced with a negative assumption of any government involvement in the economy. Its certainly true that the government involvement can hurt the economy, but its not a given assumption, and sometimes the government needs to step in to prevent others from manipulating the market. The argument should be which factors are hurting the economy for that specific market, not a blanket statement that incorrectly treats all markets the same.

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He'd be right at home on some ancient battlefield, swinging an axe into somebody's face.

Scucca

I can't agree with your choice of vocab. Laissez-faire is an ideology where efficiency is not the primary goal. It has become a warped version of conservatism and the protection of profit, even it is to the detriment of the overall good. Liberalism is perhaps the more suited word for right wing economic analysis of the “healthy market”?

The abuse of Smith by the current free market extremists does get my goat. Consider, for example, the following quote from The Wealth of Nations:

”No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.”

That is effectively a call for government interventionism. Today it would be attacked as socialism. A tad shameful.

You'd go for a comparison of market failure and government failure?

Australianlibertarian

Interesting topic.

To be honest I am probably a moderate libertarian, maybe even weak by American standards. I honestly believe that free-markets are a good thing, as they can encourage economic growth. But I do not see free-market capitalism as the fix all solution.

For example, I do believe in government education, funding of universities, universal health care, environmental and work place relations protection systems, public transport.

Why? Because many hard core libertarians or 'hard' classic liberals seem to ignore that many decisions that are made by people are not rational, but emotive, instinctive or even collective. It seems that many anarcho-capitalists seem to ignore market failures or externalities.

In short and without babbling on, universal health care, universal education or not perfect, but societies would be a lot worse off without them. Do I trust companies or individuals to comply with environmental standards? No not really, must companies wouldn't give a crap. Greed can sometimes outweigh moral or equitable judgments.

Do I want trade barriers, government subsidies and government provided corporate welfare to end. Absolutely. Do I want to live in a hard classical libertarian society. HELL NO.

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I like liberals because they believe in moral freedoms. I like fiscal conservatives because they believe in financial freedoms. The problem is; I just don't like the rest of their policies!

Libertarian all the way!

Scucca

Would you see yourself as a classical liberal in the sense of Smith (and acknowledge perhaps that the libertarian movement has unfortunately been hijacked by crackpots)?

Trade is an interesting one. Theoretically, its all over the place. For example, "new trade theory" (which isn't actually 'new' but we have to suffer the economist's choice of vocab) can not be used to argue that trade liberalisation is the best policy. We therefore can't simply refer to Smith's absolute advantage or Ricardo's comparative advantage. However, at the same time, we have broad agreement from orthodox (i.e. 'the free market is normally best') and radical (i.e. socialists) elements over 'free trade' in the long run. It just needs consideration of market problems, particularly for developing countries that need government interventionism to spark off full-blown industrial development.