The liberal theory of economics is the theory of
economics developed in the
Enlightenment, and believed to be first fully formulated by
Adam Smith which advocates minimal interference by government in the economy. The case for economic liberalism which began to be argued in the eighteenth century was the then-startling claim that if everyone is left to their own economic devices instead of being controlled by the state, then the result would be a harmonious and more equal society of ever-increasing prosperity (see
spontaneous order and
invisible hand). It is the economic component of the political
ideology of
classical liberalism. The concept of economic liberalism or market liberalism underpinned the move towards a
free market capitalist economic system in the late 18th century, and the subsequent demise of the
mercantilist system. Today, the liberal theory of economics is strongly associated with
libertarianism,
neoliberal economics and some schools of
conservatism, particularly
liberal conservatism.
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