Exceptions to the Principle of Laissez Faire

Your name
Course
Professor
University
Submission Date
QUESTION 1:
The Laissez Faire Principle
Laissez faire principle was an economic principle that was coined by a Frenchman. It is a French word which translates to “leave alone” and states that government non-interference in the economy is necessary for businesses to perform effectively, efficiently and optimally (Gibson, 2011). Subsequently, optimal performance of the economy will lead to a better society. It’s predicated on the fundamental principles of free market capitalism which advocates for individual accumulation of wealth, as opposed to the sociologist ideology of economic collectivism. In a nutshell, Laissez fair is a capitalist maxim that advocates for free market economics stating that optimal efficiency is a necessary function and a derivative of government non-interference in the running of the economy (Gibson, 2011). The principle was proposed by a French economist Dr. Quesnay who opined that businesses should be left alone to the market forces of demand and supply which is important for self-regulation in aspects such as commodity pricing and employment. As such, the principle proposes non-interference by government beyond taxation, which is necessary for production efficiency. Laissez faire became popular during the great depression where it was used to effect public policy. The great depression necessitated governments to devise economic policies aimed at controlling production, efficiency and protection of both consumers and employers from exploitation (Gibson, 2011).
John Stuart Mill accepted the Laissez faire maxim because evidently, the authoritative government intervention was poised to fail as compared to the non-authoritative one (Mill, 2011). This is premised on the fact that authoritative governance required a much stronger necessity to legitimize, notwithstanding the fact that it had excluded a vast majority of the people it represented. Additionally, Stuart argued that every subsequent increase in government functions would lead to increase in the government power, both in form of authority and influence. Drawing on the British example, he argued that limitation of the powers of any legitimate government is required for not only for purposes of representing the people but to also act as a class or amalgamation of classes (Mill, 2011). In such a case, he argued that the powers of the government would be that of a nation governing itself. A third objection to government interference is that it is premised on the doctrine of division of labor, arguing that every additional mandate charged upon the government is an additional role vested upon an institution that already has predefined functions (Mill, 1965). Subsequently, he argued that this eventually leads to poor performance, and sometimes non-performance of the government’s core functions. Still, when the government performs these duties, there would be delays which can be disastrous and fatally consequential. He opines that when the government undertakes the agency role, the outcome is a shoddy job, negligence, postponement or focus on functions that have no direct impact on the people whose power they exercise (Mill, 2011). As a result, government officers act in disregard of the enormous interests of the state. Nevertheless, he attributes this situation not only on the variety of duties vested on the government, but poor government organizations since government is multiplicity of functionaries and administrative units within itself. He asserts that this sophistication in government functions is largely to blame for the adverse effects of government intervention in economic administration one (Mill, 2011). He says that although government re-organization can help decrease the effect of the objection, he states that a vast majority of functions would be poorly done if the governments as opposed to the people who have direct interest in the business. This suggests that this effect is more pronounced in developed economies than their less developed counterparts. His argument underscores the fact maxim that people have a greater understanding of their own businesses and are thus better managers of the same than the state, thus he states that any form of government intervention or conflict should be condemned (Mill, 1965). He asserts that it’s only the consumer who is a better and competent judge of his own wealth and must be left to manage their own commodity, arguing that the principle of ‘paternal government’ is outdated even in the least enlightened commonwealth nations one (Mill, 2011). He argues that even if the government was to provide oversight and leadership through individual most experienced in the area, the results would still be affected by conflict of interest. Thus he raised the following exceptions to the rule of laissez faire:
Exceptions to the Principle of Laissez Faire
The believe that the consumer is the best, and most competent judge of the material objects produced for his consumption is admissible, though with a number of exceptions. First and foremost, the involvement of the government in education is acceptable and justifiable because in this example, both the interest and judgment of the consumer provides sufficient reasons for government intervention particularly for purposes maintaining quality (Mill, 2011). Firstly, person presumed to the best proprietor of self-interests could be unable to judge for himself due to various reasons. For instance the person may have unsound mind or be immature to make the specific judgment. Under such circumstances, the maxim of laissez faire becomes inapplicable since the person most interested lacks the required level of judgment and competence to act in his own interest (Mill, 2011). In a nutshell, the exception to the principle is when either a person is premature to make own judgment or if of unsound mind.
Another exception to laissez faire is the case where a person attempts to make an irrevocable judgment today, presuming that it will be good for his interests not only today but also into the unforeseeable future under such circumstances, the judgment is only upheld if it is believed to be premised on actual and possibly present personal experience and not based on future experience, and cannot be revoked in the event that the experience acts contrary to the predictions made beforehand (Mill, 2011). This exception is critical as it enables the state as a custodian of both present and future resources to act to protect the individual’s future interests which are indirectly the states.
The third exception to the maxim of laissez faire is premised on the notion that people can only act as judges under delegated government authority (Mill, 2011). This exception states that private management of an individual’s resources is not better placed to be considered as a legitimate manager by the person with direct interest that a government officer. He argues that agency can only be performed through joint stock associations and that just as the government is ineffective in management of private resources, so is joint-stock management. The fourth laissez fair exception is that there exist matters that state interference is necessary. The purpose being not to overrule the person’s interests but rather to affirm the judgment to which the individual may be legally incapable of, or in the case where the judgment cannot be valid without a legal sanction. An example would be the reduction of labor hours from 10 to 9, I which case the states involvement will become necessary through labor laws to protect the interests of both parties who fall under its jurisdiction. The fifth exception to laissez faire is that it cannot be appropriated to invariably large cases specifically where the parties with whom the government is presumed to interfere are not acting in their self-interest, but rather in the interest of others (Mill, 2011). A case example is that of public charity organization and other cases where acts done by an individual affect other citizens. Moreover, the maxim does not apply in situations where there are important services that should be provided to the public and there exists no interested party. In such a case, government intervention will be justified, contrary to the doctrine of laissez faire. Lastly, although the interests of the society are best performed by private and voluntary individuals, state involvement is necessary to direct those services to the most deserving people.
QUESTION 2:
Keynes exposed...