Liberal theory of economics
The liberal theory of economics is the theory of economics described by liberal authors such as Adam Smith or the French Physiocrats. It is concerned with "natural liberty" understood by these authors. Though Smith never used the term, today it is commonly known as laissez-faire. The concept of economic liberalism underpinned the move towards a free market economic system, and the subsequent demise of the mercantilist system.
The evolution of the field of economics is associated with the growth of ideas of liberalism. The liberal theory of economics is that the individual, and that individuals right to property, contract and well-being, are the primary basis of economic theory. Under the liberal theory, the individuals act primarily out of self-interest, and therefore allowing them to retain as much of the benefits of their efforts, and providing the best incentives to them will lead to the greatest good for the greatest number. (see Pareto optimum).
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