New Economic Ways of Thinking

As businesses grew and as new social classes emerged, new ways of thinking about how
businesses should be conducted (ran) arose. One such man was Adam Smith.
Adam Smith created a policy called Laissez
Faire. Laissez faire was the theory in which
businesses should be allowed to operate with little
or no government interference. Adam Smith
believed governments did not have the right to tell
business owners how to run their businesses.
Government should not be allowed to set prices on
goods, tell businesses what hours they can be open
or close, or tell businesses what products to sell.
According to Smith, people were free to choose
any business they wished for work, and employers
could hire any employee they desire. Business
owners should have the right to determine pay for
their employees, and how many hours they should
be allowed to work a week. Additionally, employers (business owners) should have the
choice in whether to provide their workers with benefits, such as overtime pay, health
insurance, vacation time, or sick days.
Adam Smith was against governments from becoming to strong and thus too much in
control of peoples lives. He was a strong supporter of Enlightenment ideas, which were
established two hundred years before his time. Without government interference, people
had the chance to become successful or to fail completely
on their own. People were also given the opportunity to
create a business in their own image, thus living the free
mans dream. Adam Smith predicted that his theory on
business would lead to more people opening up
businesses, and thus, more jobs for people. This was very
important in Smiths opinion, because of the recent
Agriculture Revolution that just took place. With
families becoming larger and larger, more people would be
in need of work. More businesses being created would
mean less people living in poverty (being poor).
Additionally, Smith hoped more businesses would open
up which would lead to competition between businesses.
Competition between businesses would lead to businesses
trying to sell their items at a very reasonable, affordable
price, thus allowing people to purchase items without going broke. More goods that are
made, cheaper the price will be on those goods. In a competitive business market,
businesses are always competing to make the most money. To make money, goods have
to be priced reasonably.

Adam Smith was not a supporter of monopolies. Monopolies are when one business
takes over smaller businesses. For example, if Adam Smith
were an oil company who bought out all the other smaller oil
companies, Smith would have a monopoly on oil. A monopoly
means you could charge whatever price you would like on an
item, and people would most likely be forced to buy that item,
since they could no longer get the item elsewhere. However,
Smiths theory on no governmental interference on businesses
did have some drawbacks. Monopolies could still form, since
the government couldnt interfere in their business affairs.
Additionally, employers were allowed to provide long hours,
little pay, little benefits, and hardly any pay increases.
Employers could fire people at any given time. In a no government interference society,
the employers became wealthier, while the poor worked relentlessly for very little.
Part 1 Answer the following multiple-choice questions
1) The economic theory of laissez-faire capitalism proposes that
A) command economies should provide the greatest opportunity for national growth
B) the practices of mercantilism should be expanded
C) the nobility should have strict control over business and industry
D) government should have minimal interference in businesses
2) Which event had the greatest impact on the development of laissez-faire capitalism?
A) Green Revolution
B) Industrial Revolution
C) Invention of the printing press
D) Fall of the Roman Empire
3) Laissez-faire economists of the 19th century argued that
A) governments should develop a state-run banking system to prevent instability
B) anarchy would result if universal male suffrage was granted
C) individuals should be allowed to pursue their self-interest in a free market
D) the government should regulate the economy and foreign trade

Turn the page >>>>>>>>>>>

Part 2 Complete the following question in a response of at least TEN SENTENCES.

Who is Adam Smith and what does he believe in? Do you agree with Adam Smiths
beliefs? Why or why not? What do you agree with and what do you disagree with? Be
sure to discuss

WHY you agree or disagree.

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