Consequences Of Laissez Faire And Social Darwinism

3. What was the appropriate goal of economics according to the Orthodox perspective? What was the goal for the economy according to the Institutionalists?
How did this lead to a different evaluation of the consequences of laissez faire by the Institutionalists, in comparison to that of the Orthodox economists?
Orthodox perspectives of Laissez faire and Social Darwinism share four basic assumptions. First, there are laws of nature, such as competition and survival of the fittest, and immutable inalienable rights to individual freedom and liberty of contract. The second is the efficacy of Smith’s self-interested “invisible hand” that leads to the production of goods and promotes the greater societal good. Third, competition is desirable because it ignites initiative. Success is a result of hard work and not of privileged status, and this has an inherent regulating effect. Fourth, government and legislation slow economic and social progress because they are fundamentally corrupt, and can be controlled by special interests and therefore cannot be trusted to play an influential role. According to Kaufman, “ The role of the state is to protect civil liberties and individual property rights; enforce the laws of contract and provide certain essential services in the realms of education, health, defense, and public protection. Beyond this, the state must not go”. (Kaufman, p.18)
In the Institutionalists view, the primary objective of Orthodox economic activity is to create material wealth and satisfy consumer demand, evident in Smith’s view that the sole end and purpose of all production is to fulfill this demand. (Kaufman, p. 19)
Institutionalists viewed Economic theory and the judgment of economy's performance to be based not on cons...

... middle of paper ...

...ion due to market failure. Institutionalists view competitive, laissez-faire markets as detrimental to human self-development and self-realization, and having a long track record of selfish motivation in competitive markets. Workers with low skills or from minority groups often earn considerably less, a contradiction to the Institutionalist ideal that self-development requires each person to have the ability to earn a living wage. Institutionalists also viewed competitive markets as tending to abuse child labor and forcing long hours on workers to achieve their ends. While this is cost effective from a purely economic perspective, it disregards the negative impact on self-development of the worker and the social impact. The monotony of repetitive work devoid of worker input is disregarded by Orthodox economists, who view the free market system as self-regulating.