Etymology and usage
The term laissez-faire likely originated in a meeting that took place around 1681 between powerful French Controller-General of Finances Jean-Baptiste Colbert and a group of French businessmen headed by M. Le Gendre. When the eager mercantilist minister asked how the French state could be of service to the merchants and help promote their commerce, Le Gendre replied simply: "Laissez-nous faire" ("Leave it to us" or "Let us do [it]", the French verb not having to take an object).
D'Argenson himself during his life was better known for the similar, but less-celebrated motto "Pas trop gouverner" ("Govern not too much"). However, Gournays use of the laissez-faire phrase as popularized by the Physiocrats gave it its cachet.
The Physiocrats proclaimed laissez-faire in 18th-century France, placing it at the very core of their economic principles and famous economists, beginning with Adam Smith, developed the idea. Indeed, it is with the Physiocrats and the classical political economy that the term laissez-faire is ordinarily associated. The book Laissez Faire and the General-Welfare State states:
The physiocrats, reacting against the excessive mercantilist regulations of the France of their day, expressed a belief in a "natural order" or liberty under which individuals in following their selfish interests contributed to the general good. Since, in their view, this natural order functioned successfully without the aid of government, they advised the state to restrict itself to upholding the rights of private property and individual liberty, to removing all artificial barriers to trade, and to abolishing all useless laws.
The French phrase laissez-faire gained currency in English-speaking countries with the spread of Physiocratic literature in the late 18th century. George Whatley's 1774 Principles of Trade (co-authored with Benjamin Franklin) re-told the Colbert-LeGendre anecdote—this may mark the first appearance of the phrase in an English-language publication.
Herbert Spencer was opposed to a slightly different application of laissez faire—to "that miserable laissez-faire" that leads to men's ruin, saying:
Along with that miserable laissez-faire which calmly looks on while men ruin themselves in trying to enforce by law their equitable claims, there goes activity in supplying them, at other men's cost, with gratis novel-reading!
In Spencer's case, the right of private ownership was being assailed and it was that miserable spirit of laissez-faire in halls of legislation that exhausted men in the effort of protecting their right.
As a product of the Enlightenment, laissez-faire was "conceived as the way to unleash human potential through the restoration of a natural system, a system unhindered by the restrictions of government". In a similar vein, Adam Smith viewed the economy as a natural system and the market as an organic part of that system. Smith saw laissez-faire as a moral program and the market its instrument to ensure men the rights of natural law. By extension, free markets become a reflection of the natural system of liberty. For Smith, laissez-faire was "a program for the abolition of laws constraining the market, a program for the restoration of order and for the activation of potential growth".
However, Smith and notable classical economists such as Thomas Malthus and David Ricardo did not use the phrase. Jeremy Bentham used the term, but it was probably James Mill's reference to the laissez-faire maxim (together with the "Pas trop gouverner" motto) in an 1824 entry for the Encyclopædia Britannica that really brought the term into wider English usage. With the advent of the Anti-Corn Law League (founded 1838), the term received much of its English meaning.
Smith first used the metaphor of an invisible hand in his book The Theory of Moral Sentiments (1759) to describe the unintentional effects of economic self-organization from economic self-interest. Although not the metaphor itself, the idea lying behind the invisible hand belongs to Bernard de Mandeville and his Fable of the Bees (1705). In political economy, that idea and the doctrine of laissez-faire have long been closely related. Some have characterized the invisible-hand metaphor as one for laissez-faire, although Smith never actually used the term himself.
In Third Millennium Capitalism (2000), Wyatt M. Rogers Jr. notes a trend whereby recently "conservative politicians and economists have chosen the term 'free-market capitalism' in lieu of laissez-faire".