The idea of government regulation of business is unheard of to the current economic, scientific, and religious beliefs. The economic expression of these beliefs is summed up in the phrase “laissez-faire.” As early as 1776, the economist Adam Smith argued in The Wealth of Nations that business should be regulated, not by government, but by the “invisible hand” of the law of supply and demand. This is the origin of the concept of laissez-faire. If government keeps its hands off businesses would be motivated by their own self-interest to offer improved goods and services at low prices. In the 19th century, American industrialists appealed to laissez-faire theory to justify their methods of doing business—even while they readily accept the protection of high tariffs and federal support. The rise of monopolistic trusts in the 1880s seemed to cut the competition needed for natural regulation. Laissez-faire theory was constantly invoked in legislative halls and lobbies to ward off any threat of government regulation.
Why is America the world’s richest nation? Is it mostly because of the government, or is it thanks to entrepreneurs and businessmen? Historian Burt Folsom of Hillsdale College explains.