LAISSEZ-FAIRE. Laissez-faire may be defined as the doctrine which demands the minimum interference by govern ment in economic and political affairs. The maxim itself was long attributed to Vincent de Gournay, a French economist of the i8th century ; but Oncken has shown that this was an error. The most probable origin of the phrase is the well-known reply of the manufacturer Legendre to Colbert who asked what he could do for industry; Laissez-nous faire (Let us alone). Others attribute its popularity to the remark of D'Argenson, the ex-minister of Louiv XV., whose insistence on the theory of free trade earlier and even more completely than with the Physiocrats makes the attribution not improbable. Whatever the actual origin of the phrase, the doctrine arose naturally at the end of the 17th and the beginning of the i8th century, as a protest against the exces sive regulation of industry by government action. A number of causes explain this protest. In both England and France, gov ernment interference with religious belief meant interference with commerce since, in both countries, trade was largely in the hands of dissenters from the orthodox faith of the state. Government interference, moreover, meant only too often monopoly ; and as early as the treatises of Sir Josiah Child the danger to commercial well-being of closed corporations is insisted upon. "No one," says Child, "ought to be able to buy immunity and monopoly to the prejudice of the country." In France, particularly, the re strictions imposed upon production both by the immense number of local customs-systems and by the jealous regulation of the different maitrises necessarily aroused dissatisfaction with the existing state of affairs.
It is curious to note how early the doctrine of laissez-faire assumed its characteristic modern form. In the Physiocrats, and especially in Mercier de la Riviere (Ordre Essentiel, ed. Daire, ch. xliv. p. 444), there is little absent which remained to be added by later speculation. The ideal society for him is one characterised by the competition of individuals armed with equal rights who freely search for their interests in the interaction of economic relationships. It is assumed that they are naturally led to take thought for social well-being by their need to exchange their products freely, and that production naturally adapts itself to that need. Distribution is, further, naturally built upon the
basis of equivalent utilities. Each individual, in the process of exchange, seeks the product which, by its utility, recompenses him for the labour he has expended upon the production of his own commodity. Under the beneficent aegis of competition, the continuous effort of producers to increase their profit leads to improvements in technique for the sake of economy, and these, as they are widely adopted, lead in their turn to lower prices. "Personal interest," says Mercier de la Riviere, "compels each man vigorously and continuously to perfect and to multiply the things he seeks to sell. He thus enlarges the mass of pleasures he can produce for other men in order to increase the mass of pleasures other men can produce for him in exchange. The world thus advances of itself." Laissez-faire is, thus, from its beginnings marked by an optimistic faith in the power of uncon trolled individual action to produce social good. This is the "natural order" which, for Adam Smith, underlay the appearance made wasteful and confused by governmental regulation, a "nat ural liberty," which in its operation naturally results in benefit to the community. In addition to Adam Smith and the physiocrats, the outstanding names in the history of laissez-faire as an economic doctrine are Say, Dunoyer and Bastiat in France, Ricardo, McCulloch and, though in a less degree, Nassau Senior in England.
Broadly speaking, the economic thesis of laissez-faire may be summarized in three propositions. 1. As a theory of exchange laissez-faire leads to such a stabilization of prices as results, in a given market, in the maximum possible satisfaction to all participating therein. 2. As a theory of production, laissez-faire results in such a disposition of the productive forces as will secure the maximum benefit from their employment. 3. As a theory of distribution, laissez-faire creates the maximum harmony between capital and labour by securing to each such a part of the common product as is equivalent to the share it has created.