ABSTRACT
Individualist Economics.—Laissez-faire, or the theory that State interference with the economic activities of the subject should be reduced to a minimum, was fed from a number of sources. The robust individualism of the new manufacturers who desired neither State aid nor State regulation; the criticism by Radicals of existing inept or corrupt governments; Benthamism and the utilitarian philosophy of which belief in laissez-faire was ‘in practice the most potent and vital principle’; 1 each of these made its contribution. But the chief intellectual support of the new creed was the classical political economy, which was born with Adam Smith and reached its highest point of influence between 1800 and 1850. Down to the eighteenth century, as we have already observed, economic speculation was always concerned with some practical object, with the application of ethical rules to economic activity or the devising of policies to make the nation rich. The scientific standpoint was only reached with Adam Smith (1723–90). He was the first to survey the economic system with an impartial eye, and to reveal the orderly plan which lay beneath its outward complexity. His demonstration of the fundamental simplicity of the economic mechanism came with something like a shock to contemporaries. A few easily intelligible conceptions were sufficient to explain its working; division of labour, exchange, the enlightened pursuit of self-interest. The price-index acted as a marvellous regulator of economic activity. It showed producers where they could sell dearest and consumers where they could buy cheapest. Supply responded to demand, and competition among producers reduced costs to the lowest possible level so that society obtained the benefits of cheapness and plenty. In their search for private gain, producers promoted the general welfare. By means which could only be described as providential, the interests of individuals and of the community coincided. An ‘invisible hand’ overruled the efforts of private persons for the public good.
