levo

Liberalism

Classical liberalism and laissez-faire economics

  • 3 things to know
  • A2 Unit 3

Overview

Smith's image of the invisible hand, economic liberalism and free trade.

What you need to know

Answer each one before you reveal it.

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Key term

What does laissez-faire mean?

Key term

Which 1776 work made the case for the free market?

Key term

Define economic liberalism.

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What does laissez-faire mean?

    Model answer

    The doctrine that the state should leave the economy alone, allowing production and exchange to be regulated by competition.

  2. 2

    Which 1776 work made the case for the free market?

    Model answer

    Adam Smith's The Wealth of Nations.

  3. 3

    Explain Smith's image of the invisible hand.

    Model answer

    Individuals pursuing their own gain are led, without intending it, to produce outcomes that benefit society as a whole through exchange and the division of labour.

  4. 4

    Define economic liberalism.

    Model answer

    The application of liberal individualism to the economy through private property, freedom of contract, competitive markets and minimal state interference.

  5. 5

    Why do classical liberals think markets allocate resources better than governments?

    Model answer

    Prices carry information about scarcity and demand that no central planner can gather, and competition punishes waste.

  6. 6

    What is free trade, and why do liberals support it?

    Model answer

    Exchange between countries unobstructed by tariffs and quotas, which liberals argue enriches both parties and reduces the causes of war.

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AAccess is bought rather than earned.
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