EXPLAIN LAISSEZ-FAIRE THEORY (300 Words)
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EXPLAIN LAISSEZ-FAIRE THEORY (300 Words)
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EXPLAIN LAISSEZ-FAIRE THEORY (300 Words)
Answer:
A government regulation can do only one of two things: It can stop me from buying that which I wish to buy; or it can force me to buy that which I would otherwise not buy.
Either way, I am made worse off. I am less wealthy than I would otherwise be.
Rather than my choices as a consumer being what determines what is produced, the opinions of bureaucrats are substituted, and it is their wishes which are catered to. Their preferences end up choosing the economic winners and losers.
That said, do not confuse government, the institution of “legitimate” coercion, with governance, the mechanism of feedback and control. They are not the same thing.
Without government interference, economic winners are only those who better serve consumer wants. Consumers will not buy from those who don’t treat them well. The megacorp of yesterday is only here today if those who run that firm correctly anticipated what it would be consumers want today.
Those entrepreneurs who guess correctly make profits, those who guess incorrectly make losses. Any interference in this process only serves to distort the structure of production away from satisfying consumer wants, keeping beneficial products off the market, or maintaining inefficient or unwanted processes in production thus wasting resources.
Be careful about falling into the trap of Hybris: You do not know more than everyone else, neither do I. No matter how much it seems chaotic or inefficient from the outside, markets are constantly shifting, constantly adapting to changing circumstances. Profits signal the more efficient use of resources, while losses result from less efficient uses.
Firms going out of business means this mechanism is working. Bailouts are the worst kind of interventionism, prolonging inefficiency and promoting poverty.
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