Laissez faire is preferred over Government Regulation and Intervention because of the fact that it allows the pure forces to determine the market. In an ideal setting, the needs of supply and demand will be able to adjust to each other to arrive at an optimal price. According to Adam Smith in his book entitled, The Wealth of Nations, discusses the basic precept of the invisible hand in that in a free market a person who chooses to be greedy and pursue his own interests in invariably also furthering the good of the entire community. This basically argues that if all individuals acted according to what would benefit them the end result would still be that the greatest good for everyone would occur. Individuals acting according to what they see is the best course of action for them and contributing not only to their personal gain but the gain of the community as well.
Need essay sample on "Laissez faire" ? We will write a custom essay sample specifically for you for only $12.90/page
Therefore, even assuming that there are other forces, outside of government intervention, that are at work in a Laissez Faire Structure, it is reasonable to believe that under the current circumstances, Laissez Faire Structure would be the better one to implement because of the recent market crashes. Though governments all over the world are struggling to keep their economies afloat, it is increasingly clear that the problem could have been avoided without unnecessary government rules and regulations. Under a free market system, this global economic meltdown could have perhaps been averted.
Another reason why Laissez faire is preferable would be due to the self-interests of governments. While the invisible hand does allow for the pursuit of self-interests, such a model in inapplicable to a government because it subject the individuals to a collective interest which is not necessarily self interests. Laissez Faire allows the basic market forces to interact to arrive at the optimal distribution of wealth. Government intervention, on the other hand, would simply look at the local economy. Laissez Faire should, therefore, be the method by which the market is run because of the advantage that it has over government intervention.
As the current economic meltdown shows, there is indeed a dire need for government intervention. At the peak of the Great Depression, John Maynard Keynes advocated for government intervention so solve the problem. Similarly, the US $700 Billion bailout plan mirrors the type of government intervention that stopped the Great Depression. The reason this policy was effective was because it negated the effect that other negative forces had upon the economy. Without the ease by which goods could travel, such as in the present, the economy had to be resuscitated by the government. As history shows, the solution lies not in letting the market forces dictate the flow of the economy alone but by allowing the government to regulate such flow.
The great danger in allowing a free market economy is that it does not allow for regulations. We exist in a global market. An action in one end of the world invariably affects the other side. As such, care must be exercises, especially with regard to economics because of the repercussions that it might have. The more complex markets of today have shown that the pursuit of self-interests, while natural of human behavior, must be regulated by external systems in order to ensure a more equitable and efficient allocation of resources.
Government intervention has been heralded as the solution to the inefficiency of markets because of the fact that it allows for a more efficient and effective distribution of resources among the players in the market. As the government is but a tool, a conduit, for the movement of resources, it is, therefore, but logical to argue that in order to achieve optimal efficiency in the economy, there must be government intervention. Without this, markets will collapse, as the recent economic meltdown has revealed.