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What is Laiserz Faire? Three economic issues

Updated on May 28, 2016

Let’s take an overview of the entire human history. It turns out to be much poorer than conventionally imagined. Millions of years have passed since Darwin’s famous homosapiens began to learn how to speak and walk on foot to raise in its ever-growing brain the ambition to be the supreme master. Thousands of years have elapsed since human invented love, war and art. However, the changes just started to occur nearly 100,000 years ago while the profound changes happened less than 5-6 thousand years ago. This means that human history remained almost in blank for millions of years.

Alvin Tofler illustrates the theory by dividing the latest 50,000 years of mankind’s history into 800 life-phases of each 62 years and notes that only in the latest 70 life-phases, information could be handed down from the formers to the later life-phases by the use of script. Just in the latest six life-phases, print was invented. Only in the latest four life-phases, time could be measured with precision. In the last two life-phases, electric appliances could be used. The majority of goods we are using today have been developed during the 800th life-phase which is not yet completed.

Goods are the production of market economy. What is market economy? It is an economic system that is controlled mainly by the market. In such an economic system, price is determined by the supply and demand relationship, by enterprises which have the right to freely decide what, how and for whom goods are produced to gain maximum profits.

Adam Smith (1723-1790), with the book “The wealth of nations”, laid the foundation of the theory of Laiserz Faire. The theory comprises of some main contents as follows:

  1. Individuals and enterprises all have rational attitudes to consumption and production. They always seek for individual profits and aim for maximizing their profits.
  2. The general administration of the economy is guaranteed by an invisible hand which arranges and combines the activities of individuals. That hand is the agency which implements a natural command mentioned in the laws of the market.
  3. The market is the driving factor to regulate the market. Demand for and supply of goods, labor and capitals will intersect to determine the equilibrium price: good price, wage or rate of returns.
  4. In the markets, exchanges are implemented by means of money.
  5. According to the theory of the so-called neoclassicists, it is necessary to attach great importance to utility value and its impact on price and the quantity of goods. Besides, they also emphasize the theory of marginal value, specifically the consequences by introducing an additional unit into an available process.

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