178 laissez-faire
to grow and the socialist and communist economies
stagnated, the labor theory of value declined in popu-
larity. It remains in the basic Protestant work ethic and
various equal-pay-for-equal-work movements, but
with the increasing complexity of the world economy,
it becomes harder to identify the sources of labor in
any product, and therefore the labor theory of value
loses much of its explanatory power.
Further Reading
Meek, R. L. Studies in the Labour Theor y of Value,2nd ed. New
York: Monthly Review Press, 1973.
laissez-faire
The economic and political doctrine that government
should “leave alone” business activity as much as possi-
ble. Accompanying MODERN CAPITALISMand free-market
economics, laissez-faire policies allow businesses and
individuals to produce, exchange, and consume eco-
nomic products with a minimum of government regu-
lation or interference. The STATEin this view performs
the minimum duties outlined by John LOCKEof protect-
ing individual NATURAL RIGHTSto “life, LIBERTY, and PROP-
ERTY,” otherwise leaving people alone. Government
thus provides basically a judicial function: police catch-
ing thieves, killers, kidnappers, and so on and punish-
ing them. The underlying assumption of laissez-faire
policy is that the society and economy will work best
(most harmonious, happy, prosperous) if left free. The
state may provide for a few large, common enterprises
or public utilities (roads, electricity, military defense,
prisons) but leaves most economic activities in the pri-
vate sector. This IDEOLOGYis often associated with the
CONSERVATIVEParty in Britain and the REPUBLICAN PARTY
in the United States (for example, President Ronald
REAGAN), with their programs of reduced taxes, reduced
government services and regulations, and probusiness
policies. A logical philosophical expression of laissez-
faire ideas occurs in LIBERTARIAN(Robert NOZICK) and
ANARCHISTtheories.
Critics of laissez-faire economics argue that com-
plex modern society requires greater government regu-
lation and help for the poor. U.S. LIBERALDemocrats
and European SOCIALISTSoften attack laissez-faire atti-
tudes and programs as unrealistic, hypocritical, and
unfair.
Most Western INDUSTRIALdemocracies do not prac-
tice laissez-faire capitalism or total state socialism but
a mixture of the two: a “mixed economy” of private
business enterprise and government regulation and
social programs in education, housing, banking, health
care, and so on. Purely laissez-faire market economics
probably never existed in any country, but they were
more prevalent in early capitalism (18th-century
Britain, 19th-century United States) than in recent
years. The Modern labor movement was a principle
influence on ending extensive laissez-faire economics.
Only a few contemporary economists (such as Milton
Friedman) advocate laissez-faire.Further Reading
Emmett, R. B. Selected Essays: Laissez Faire.Chicago: University
of Chicago Press, 2000.Lassalle, Ferdinand (1825–1864) Political
theorist and activist
Lassalle was deeply involved in socialist politics and
organization in Germany, participating in the revolu-
tion of 1848 and founding the first German socialist
party, the General German Workingmen’s Association,
in 1863. He was a sometime friend and correspondent
of Karl Marx, led a flamboyant life, and died at age 39
in a duel.
Lassalle contributed to socialist political thought in
two areas: In economic theory Lassalle developed what
he called the iron law of wages; in the theory of social-
ist revolution, he advanced the idea that the state
could be transformed into an ally of the working
classes. The iron law of wages determined that the cap-
italist market would depress workers’ wages until they
reached the minimum level required to keep the
worker and his family alive. The only remedy to this
was for workers to exit the wage-labor system and to
work in producer cooperatives that the workers owned
and that would return the full value of their labor.
Lassalle’s understanding of the state and the role it
played differed radically from Marx’s own understand-
ing and was the chief source of Marx’s increasing
antagonism toward Lassalle and his followers. Lassalle
denied that the state was necessarily against the inter-
ests of the working classes. He argued that the state
could and should reflect the interests of workers and
that this could be achieved through universal and
direct suffrage.
Marx’s Critique of the Gotha Program,where he sets
out his only systematic account of a future communist
society, is Marx’s response to Lassalle’s ideas, particu-