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Laissez-faire economics

Definition

Laissez-faire economics refers to a policy where the government takes a hands-off approach and allows the market forces to operate freely without much interference or regulation.

Analogy

Imagine a school cafeteria with no supervisors or rules. Students are free to do whatever they want - eat as much as they want, take food from others, or even throw food around. There is no one enforcing any regulations. This represents laissez-faire economics where the government doesn't intervene in the market and lets it function without restrictions.

Related terms

Great Depression: The severe economic downturn that occurred worldwide during the 1930s, which exposed the limitations of laissez-faire policies and prompted governments to intervene more actively in their economies.

Capitalism: An economic system characterized by private ownership of resources and businesses, where individuals pursue their own self-interests through voluntary transactions in a mostly unregulated marketplace.

Adam Smith: A Scottish economist who advocated for free markets and wrote "The Wealth of Nations," which became influential in promoting laissez-faire economics.