Question

Malcolm Chan believes that owners of property should be free to to do almost aanything they like with it in order to make profits. In addition, he feels that when an indiviudal makes a profit in a business venture the entire society benefits. Chan's beliefs represent the economic philosophy known as:

a.laissez- faire capitalism

b. mercantilism

c.socialism

d.welfare capitalism

Answer 1

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Answer – The word ‘laissez-faire’ means to leave things alone, such that they can operate on their own, without any external intervention. So, laissez-faire term refers to free market in economics. By free market, we refer to those market structure, where the forces of demand and supply are allowed to operate freely, without any intervention from the government.

The main characteristics of laissez-faire capitalism are private ownership, free trade and competition.

By private ownership, we mean that individuals would be considered owners of their property. So, the decision of what to produce, how to produce and for whom to produce would depend on the owners of the privately-owned properties. In absence of capitalism, these decisions were done by the government, which is against the ideology of laissez faire.

Another important characteristic of laissez faire is competition. It encourages the idea that firms should compete when the forces of demand and supply freely operate in the market such that the optimum or equilibrium can be attained without any external intervention. Competition benefits the society by encouraging innovation and lowering the prices of goods.

Free trade is another important ideology of laissez faire, which highlights the principle of firms operating in the market without government intervention.

Now, after comparing the characteristics of laissez faire with Malcolm Chan’s believe, we see that he represents the economic philosophy of laissez faire (Option A).

Let us elaborate.

Malcolm Chan believes that owners of property should be free to do almost anything they like with it in order to make profits, which promotes the idea of free trade and private ownership – two most important principles of laissez faire. In addition, he feels that when an individual makes a profit in a business venture the entire society benefits, which again represents the idea that competition benefits the society, helping it reach the optimum.

So, Option A is the correct answer.