System Of Economic Views - Economic Liberalism
Aa
Share
Every economy has different views. Many current views originated centuries ago. Getting to know them may make it easier to understand the goals and actions of people who believe in idea. One such system is economic liberalism.
Definition
Economic liberalism (laissez faire) is a system of economic views, assuming that the economy itself, without external interference, strives for balance and development due to the so-called the "invisible hand of the market", which itself is the best at allocating resources. Therefore, the state and other political and economic organizations should remain neutral towards the processes taking place in the economy. The theories of economic liberalism were a response to the mercantile policies that rationed production and maintained protectionism.
Sources of economic liberalism
The sources of economic liberalism can be found in two philosophical and economic systems:
- the views of the French physiocrats of the eighteenth century,
- English classical political economy of the eighteenth century.
Main assumptions of liberal economic policy
There are three main areas of social life in which economic liberalism strives for full freedom, and they are:
- individual freedom (demands against personal and land servitude and free movement of labour),
- freedom of economic activity (industrial freedom, fight against burdens and restrictions on this freedom),
- freedom of trade (free movement of goods within the country, outside its borders as well as on the seas and oceans).
Representatives of economic liberalism
The first representatives of liberalism were D. North, D. Hume and P. de Boisguillebert. The aforementioned Adam Smith is considered the most important representative of economic liberalism. The other most famous classics are David Ricardo, Jean B. Say and John S. Mill.
Physiocracy
Its creator is considered to be Francois Quesnaya. He stated that agriculture gives the best products and it is thanks to it that the development of the entire economy is conditioned. Other branches of industry, such as crafts and trade, are of little importance. He believed that it was natural for everything to be based on the principles of personal property. Thanks to this solution, the owner can have all the elements related to agriculture (land, product and labor). it postulated the abolition of manufacturing monopolies, internal tariffs, guilds and all other restrictions on free trade.
English classical political economy
Adam Smith is considered its creator. According to this doctrine, economic life and all the laws occurring in it are objective in nature (this means that they are independent of the will of people). According to this theory, the state cannot interfere in the economy, and the only role of the state should be limited to the protection of borders and the internal legal order.
According to the thinkers of this theory, freedom of economic activity is a human right. Arguing that individuals, directing their personal interests, want to achieve the greatest possible benefits, which in turn brings great benefits to the general public.
Philosophers of the classical school allow the only regulator of economic life, which is the free competition of private entrepreneurs, which eliminates weak and helpless individuals from social life. The classical school of economics, whose creator is considered to be the English scientist Adam Smith, assumes that the market regulates itself. Therefore, an increase in unemployment causes a decrease in wages, because more people compete for a given number of jobs.
The reduction in wages results in lower production costs, which contributes to its recovery. This, in turn, increases the demand for labor and decreases unemployment. Therefore, according to the classics, restrictions on employment and wages should be lifted. They believe that all market disturbances are temporary and in the long run the economy will bring itself to equilibrium.
Source: Marciniak S. Marko i Mikroekonomia Podstawowe problemy
