International Journal For Multidisciplinary Research

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Adam Smith’s Theories of Laissez-Faire Capitalism: A Critical Analysis in the Context of Modern Economic Practices

Author(s) Dr. ASHWATH YADAV G S
Country India
Abstract Adam Smith is commonly considered to be one of the foundational philosophers of classical economics and the contemporary capitalism. His division of labor, self-interest, competition, free trade, limited government and the invisible hand have had a strong influence on economic thought and the public policy. Yet, the simplification of the ideas of Smith into the belief that he advocated total government non-intervention in the economy is a simplification of his ideas. This paper critically analyzes the theories of laissez-faire capitalism by Adam Smith in the modern economic practices. It maintains that Smith believed in economic freedom, competition and minimal government interference, but never meant an unregulated economy would be a good idea. His economic concepts were directly related with the moral philosophy, justice, communal welfare, and stability of institutions. In the contemporary context, laissez-faire capitalism has led to the growth of the economy, innovation, entrepreneurship, productivity, consumer choice, and global trade. Meanwhile, the drawbacks of uncontrolled markets are demonstrated by the contemporary issues of income inequality, monopoly power, environmental degradation, labor exploitation and financial instability. Thus, the theories of Smith are still applicable, they must be critically re-read in the context of contemporary mixed economies. The practical value of the economic thought of Smith is best reflected by a balanced economic system that is based on a combination of market freedom and ethical responsibility, public institutions and effective regulation.
Keywords Adam Smith, laissez-faire capitalism, invisible hand, free market, modern economy, inequality, regulation, mixed economy.
Field Sociology > Economics
Published In Volume 8, Issue 3, May-June 2026
Published On 2026-05-15
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E-ISSN 2582-2160
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