ECONOMIC LIBERALISM

Economic Liberalism

Economic Liberalism

In the subject matter of economics, there are several types of political ideologies that the government can assume for the economy. Those roles are: Economic Liberalism, economic nationalism and economic radicalism. To decide which political ideology is most appropriate when talking about economics, we must first define each of them.

Economic Liberalism is an economic theory, in which freedom of action for the individual and the firm is promoted through several principles: self-interest, free trade, laissez-faire, private property, and competition. (Smith 1976)

In this type of economic system, persons were are free to seek out their own personal occupations, enter into any business operation or venture, and to try and improve their economic opportunities however, whenever, and wherever they (the person) see fit to do so; because of these several factors, self-interest is consequently the driving force of the economy under the Economic Liberalism system.

Also, under this type of system, competition regulates the economy. Businesses compete with one another through the making of new and better products and the selling of already existing products at lower prices than others. Another policy reigns under economic liberalism; that policy is Laissez-faire. Laissez-fair is a policy where there is no government involvement in the economic activities of individuals and business alike. Economic liberalism has weaknesses, however. The most profound weakness is its dependence on the beneficial effects of self-interest and its undue reliance on competition to regulate the economy and promote the general welfare.

Smith provided the first theoretical framework for classical political economy. The notion of political economy was invented at this time. Smith's work was not wholly original in its content but combined the ideas and thinking of many before him and set out his analysis and explanation of the process of political economy. (Brown 2005)

While economic liberalism favors markets unfettered by the government, it maintains that the state has a legitimate role in providing public goods. For instance, Adam Smith argued that the state has a role in providing roads, canals, schools and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption (e.g. putting a toll). In addition, he advocated retaliatory tariffs to bring about free trade, and copyrights and patents to encourage innovation. Robert Cox's further research highlighted the importance of innovation and its deeper implications on the free market.

Government intervention is a necessary remedy to ...