MARIANO MARCOS STATE UN

College of Business, Economics an

Accountancy
Learning Activity Packets (LAP)
Activity II
1. Why Laissez-faire was a significant concept during Adam Smith’s time?
When we talk about Adam Smith, the first thing that comes to our mind is
“Father of Modern Economics”. As a matter of fact, he contributed a lot with regards
to economics during his time. His most famous work was the book “The Wealth of
the Nations” wherein he presented different concepts of the market. Within this book
he expounded the concept of laissez-faire and its role in achieving economic success.
So, why does his concept of laissez-faire brought upon great significance in the
economy.
The concept of laissez-faire was popularized by the physiocrats during the 17th
century in France. Laissez-faire is defined as an economic theory that states that the
lesser government interference in the market system is simply the best. At a latter part
of the 17th century, Adam Smith backed-up the concept of laissez-faire in his book,
The Wealth of Nations and contradicted the ideals of Mercantilism and insisted that
the true wealth of nation consisted of all the goods that all the people in society
consume and not by the amount of gold and silver a nation has. During this time the
economy was chaotic due to too much government involvement and Smith didn’t like
this since he believes that government is spendthrift, irresponsible, and unproductive.
He emphasizes the significant role of Laissez-faire in the market believing that it
should be left alone for it to find its own natural levels of price, wages, profit, and
production. By this, the society will eventually meet its desired ends which are to be
successful. Because of this, there was a great shift within the market system and
because of Laissez-faire the concept of Mercantilism was slowly abolished paving
way to a new free market system.
Adam Smith may not be the proponent of Laissez-faire, but he is the one who
were able to succeed in integrating the concept in the economy during his time
wherein the ideals of Mercantilism were still prevalent. It ended the long reign of
mercantilist in Europe. It was indeed a revolutionary event that will later on change
the entire face of the economy up to this modern day.
2. Why David Ricardo describes the landlords as villains?
Although David Ricardo was a landlord himself, he didn’t like what he was
witnessing during his time. Mainly because there are those who are trying to make a
living but couldn’t due to subsistent wages and hard living conditions and there are
those who constantly reap the benefits without even shredding a single sweat.
Among the three; workers, capitalist, and landlords, Ricardo notices that the
landlords have an advantageous position among them. Since then agriculture was the
main source of economy in Europe, therefore the citizens have to work in fields on the
other hand the capitalist will hire them to work on their lands which they rented from
the landlords. The problem that Ricardo notices is that different kind of lands has
different level of productivity, but despite that the landlords still charges the same
amount of rent regardless if the land is productive or not. Since the landlords keep the

#16S Quiling Sur, City of Batac, Ilocos Norte

 cbea@mmsu.edu.ph  (077) 600-3736 www.mmsu.edu.ph
 MARIANO MARCOS STATE UN
College of Business, Economics an
Accountancy
productive land for their selves the capitalist have no choice but to rent lands which
are unproductive. As a result the profits yielded on those lands are pretty much below
average that is the reason why the capitalist are struggling to make money in this type
of system. When the capitalist aren’t able to generate enough profit then they will
have no choice but to pay their workers with subsistent wages. Therefore, both
capitalist and worker are struggling and only the landlords who have control on the
land and rent are profiting.
Ricardo hated how the landlords took advantage of the economy, it’s like
working hard for something and then in the end you won’t be able to reap the benefit
of your hard work since it is already taken for granted. The economy during Ricardo’s
time is struggling and that the society which are the benefactor of it wasn’t able to get
what they deserve since it was taken advantage by powerful entities that only focuses
on self-interest. Ricardo considered the act as villainous and that the landlords are
villain because they are the only ones who are benefitting from the progress of
society.

Prepared by:
NYL JERICHO A. VALENTE
Student

#16S Quiling Sur, City of Batac, Ilocos Norte

 cbea@mmsu.edu.ph  (077) 600-3736 www.mmsu.edu.ph