Laissez-faire is the doctrine that government should leave economic life largely alone, allowing individuals and businesses to produce, trade, hire and set prices with as little regulation, taxation, subsidy or protection as possible. The French phrase means roughly "let them do" or "leave it be". In a strict laissez-faire view the state's role is limited to defence, policing, courts and the protection of property rights.
Laissez-faire is the strongest form of free-market economics and is often contrasted with mercantilism, which preceded it, and with the mixed economy and welfare state that replaced it in most rich countries in the 20th century. It is related to, but not the same as, neoliberalism, which accepts an active state role in building and policing markets. No modern economy is fully laissez-faire.
Laissez-faire in plain terms
Think of a parent who lets older children sort out their own games in the park, only stepping in if someone is hurt or something is stolen. The children make their own rules, swap toys and settle squabbles, and the parent believes they usually do better that way than with constant supervision.
Laissez-faire applies the same attitude to the economy. The government watches from the bench, protecting people from force and fraud, but it does not decide what gets made, what it costs, who gets hired or which countries goods can come from.
Origins of the phrase
The expression is usually traced to late 17th-century France. A story told in the 18th century has a merchant named Legendre answering the finance minister Jean-Baptiste Colbert, who had asked how the state could help trade, with "laissez-nous faire" ("leave us alone"). The longer slogan "laissez faire, laissez passer" is associated with the 18th-century official Vincent de Gournay, and the physiocrats, led by François Quesnay, used it to attack France's tolls, guild rules and grain controls.
Adam Smith did not use the phrase, but The Wealth of Nations (1776) gave laissez-faire much of its intellectual case through the invisible hand and his attack on monopolies and trade restrictions, and classical economics broadly supported it.
The 19th-century high point
Laissez-faire reached its greatest influence in Victorian Britain. The Manchester School of Richard Cobden and John Bright campaigned for free trade, and the repeal of the Corn Laws in 1846 removed protection for domestic grain. The Cobden–Chevalier Treaty of 1860 cut tariffs between Britain and France, and the gold standard provided a monetary framework with little room for discretionary policy.
Even then, laissez-faire was never complete. Britain passed Factory Acts limiting child labor and working hours from 1833, regulated railways and built public health systems. In the United States, the late-19th-century Gilded Age combined rapid growth with monopoly trusts, which led to the Sherman Antitrust Act of 1890, and US courts in the "Lochner era" (named after a 1905 Supreme Court case) struck down many labor laws as interfering with freedom of contract.
Decline and legacy
John Maynard Keynes's essay "The End of Laissez-Faire" (1926) argued that private and public interest do not always coincide. The Great Depression destroyed much remaining faith in unmanaged markets, and the New Deal in the US and post-war welfare states in Europe established a large permanent role for government, guided by Keynesian economics. Laissez-faire ideas revived in part from the 1970s, through the Austrian school, libertarian thinkers and the policies of deregulation and privatization, but no major economy returned to the 19th-century model; public spending in most rich countries remains well above a third of GDP. Today the word is often used loosely, sometimes as criticism, for any hands-off stance by a regulator, for example in debates over technology platforms or cryptocurrency regulation.
Arguments for and against
Supporters argue that:
- Markets coordinate better. Prices and competition allocate resources more efficiently than officials.
- Intervention backfires. Regulation invites lobbying, regulatory capture and unintended consequences.
- Freedom matters. Economic liberty is part of personal liberty.
Critics argue that:
- Markets fail. They under-provide public goods, ignore externalities like pollution and can create monopolies (see market failure).
- Social costs were high. Historians point to 19th-century factory conditions and to relief policy during the Irish Famine of 1845–52, which critics argue was shaped by laissez-faire thinking.
- Instability. Unregulated banking and finance produced repeated panics and depressions.
- Inequality. Without taxes and transfers, income and wealth tend to concentrate, a concern raised by both socialist and liberal economists.