Financial and Monetary Reform

We have so far focused on hypothetical laissez-faire systems, but what about modern real-world systems with their ubiquitous state intervention? What bearing does laissez-faire have on the real world? The answer is that it provides an ideal benchmark — not only a benchmark, but also an ideal to be aimed for — against which we can measure real-world systems. As we saw repeatedly in earlier chapters, and despite many claims to the contrary, there are no convincing reasons to suppose that laissez-faire ‘fails’ in any reasonable sense — most particularly, laissez-faire provides a safe, stable and efficient financial system, and ensures that the currency has a guaranteed stable value. Laissez-faire is highly efficient, but it is efficient not only in the narrow sense most familiar to economists, but also in a broader institutional sense — the institutions that arise under laissez-faire serve socially useful roles, they are regarded as legitimate, and so forth. The key to its efficiency is very simple: laissez-faire harmonises the disparate interests of different individuals, interests which we cannot assume to be naturally harmonious, and which, under alternative arrangements, could easily produce all sorts of undesirable outcomes. In the words of Adam Smith, a man will be more likely to obtain what he needs from others