Emergence of the Free-Market Economy

Emergence of the Free-Market Economy
The free-market economy is an economic system in which individuals make the majority of decisions regarding economic activities and transactions without government control. Individuals have the freedom to make economic decisions pertaining to their employment, what expenditures to make, how to use or accumulate capital, and whether to use their resources now or to save them for later consumption. But where did this concept start? What or who were the influences? What are the advantages and disadvantages of free-market economies? In the following, we discuss the historical and philosophical forces and issues that influenced the emergence of the free-market economy.
Laissez-Faire (French, “let things alone”)
In Western Europe during the 18th century, the policy of domestic non-intervention by government in individual or industrial monetary affairs was known as laissez-faire, French for “let things alone, let them pass” (http://en.wikipedia.org). The principle favors capitalist self-interest, competition, and natural consumer preferences as forces leading to optimal prosperity and freedom. It was believed that the natural economic order, untouched by regulations or adjustments, was best designed to produce maximum well-being for all. In France, pioneer economists, known as physiocrats, first developed the theory of laissez-faire, which stressed non-interference with commercial ventures. The primary principles of free-market economies are based on this theory. The most important and influential proponent of laissez-faire capitalism was 18th century British economist Adam Smith.
Economist Adam Smith
British philosopher and economist Adam Smith authored The Wealth of Nations (1776), the first serious attempt to study the nature of capital and the historical development of industry and commerce among European nations. Smith believed that individual welfare was more important than national power. He supported a policy of free...