Phan Thi Tu Anh 12E10 English for Economics Translation

CHAPTER 2

What is LAISSEZ FAIRE?

Let take a glimpse at the whole history of the human-beings. It turns out to be much poorer than
conventionally imagined. Millions of years have gone by since Darwins famous homosapiens began to
learn how to speak and walk on and to raise in its ever-growing ambition to be the supreme master,
thousands of years have passed since human created love, wars and art. However, changes have just
started to come out for no more than 100,000 years, and significant changes took place for 5-6000 years.
It means the past millions of years remain almost in blank?

Alvin Tofler described this issue by dividing the latest 50,000 years of mankinds history into
800 life-phrases of 62 years and commented that: Information could be handed down from the former to
the later life-phrase by the use of scripts only on the latest 70 life-phrases. Printed script could only be
found on the latest 6 life-phrases, time could be measured with precision on the latest 4 life-phrases and
electric appliances could be had during the latest 2 life-phrases. The majority of goods we are using
today have been developed during the 800th life-phrase which is not yet completed?

Goods are the output of the market economy. So what is a market economy? It is an economy
which is mostly adjusted by the market. In the market economy, prices are determined by the supply and
demand relationship, by enterprises which have the right to freely decide what to produce, how to
produce and for whom to produce in order to make maximum profits.

Adam Smith (1723-1790), with the book The wealth of nations, was the first to lay the
foundations for the theory of free market (laissez faire). The main points of this theory are:

a. Both individuals and businesses have rational attitudes to consumption and production.
They always seek for their own profits and tend to maximize it.

b. The overall operation of the economy is guaranteed by an invisible hand which arranges
and combines actions of individuals. That hand is the agency which implements a natural
command showed on rules of the market.

c. Market is a motivating element to adjust the economy. Supply and demand of goods,
labour and capital will meet each other to create equilibrium price including input cost,
salary and profit.

d. In markets, rate of returns are implemented by means of money.

e. Finally, as for theories of the so-called neoclassicists, we need to attach great importance
to utility value and the impact of utility value on the amount and price of goods. They
also highlight the theory of marginal value, which is impact arisen by introducing an
additional unit into an available process, to be more specific.