A Case Study of the Pioneers
Chapter 1: Introduction
The principle of laissez-faire endures as a compelling idea in economic thinking. In essence, this standard suggests that, in economic affairs, a harmony of public and private interests exists such that maximum social welfare is guaranteed given individual choice in free markets. Its attraction is manifold. Economic theories premised on individual maximization in free markets assure determinant solutions. Corollary policy recommendations are simple and direct: the scope for government intervention is limited to the provision of a legal framework to maintain competition and of limited public goods such as defense and education. In relation to philosophy, laissez-faire connotes a natural design principle that appeals to the search for an underlying order of natural law.1 In relation to social philosophy, laissez-faire complements the democratic ideal of individualism with its emphasis on the primacy of private choice in all decisions. Thus it is not surprising that laissez-faire would serve as a standard in the minds of economists as they construct theories with corollary policy recommendations. And in fact the development of American economics in the twentieth century substantiates this position.2 At the turn of the century, the majority of American economists accepted the notion that the research of Alfred Marshall and John Bates Clark had produced a ‘satisfactory logical synthesis of the older classical and the utility school doctrines’, a union which had preserved the laissez-faire doctrine as a point of departure in policy considerations (Dorfman 1959:5, p. 464). At the same time, American economists confronted contemporary industrial conditions that evidenced...