“Laissez Faire” is usually thought of as a policy of “unregulated” markets. And, in a sense, it is. Its proponents, after all, relentlessly push “deregulation.”

According to the Third School of Political Economy, in both its French Liberal and Austrian incarnations, Laissez Faire should be regarded as “natural” — the very antithesis of a contrivance — expanding on Adam Smith’s “invisible hand” metaphor. And there is sense to this characterization as well.

And yet Laissez Faire is a doctrine of business regulation, as I tried to point out on my Facebook economics page recently:

Third School of Political Economy
 

But what this little post did not make clear enough was the dual nature of Laissez Faire’s regulatory structure. Free markets rest on a rule of law, whereby private property is protected — including the property in one’s own body (“self-ownership” or “self-government”) — and government is disbarred from interfering in the uncoerced production and distribution of wealth. The regulatory aspect is that dual prohibition: individuals in business and out of it must not commit thievery either by plunder or fraud; individuals in “public service” must not prohibit trades other than in the trade of stolen goods, and must not set the terms of those trades. And thus Laissez Faire quite unnaturally — conventionally — regulates the State as well as the general populace. It prohibits crime and it prohibits corruption. And it thus provides the most basic and scalable of regulatory enterprises. These prohibitions alone constitute huge barriers to many careers and many acts that many people hanker to commit. And since they rub against the grain of many an ambition, their “naturalness” can chafe.

Sure seems unnatural to politicians, anyway!

And thus, I think, we have a plausible case for looking at Laissez Faire as a regulatory regime. Not a mere absence of regulation.

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