The key to Smith's Free Enterprise economy is the lack of government involvement or regulation. In the United States today, we have government regulations in the form of child labor laws, environmental protections, health and safety regulations for food and products sold to the public, and any other area of business that the public deemed necessary. However, Adam Smith argued that government regulations hindered progress and therefore did more harm than good. He believed that without government intervention, the most efficient business would survive and flourish, and inefficient ones would not be able to compete and so go out of business. This idea became known as "Social Darwinism" or "survival of the fittest."

So what are the advantages of an unregulated economy? Smith argues that unregulated economies encourage technological progress and rapid growth of industry. This is often the case. If the producer has the ability to act in his own best interest at all times, he will reap the benefits of his hard work (potential profit) and therefore be willing to work harder. Smith said this benefits all of society because consumers would then have more goods and services available to them at lower prices.

What are the disadvantages of an unregulated economy? Critics argue that producers often take advantage of their workers, making them work long hours for little pay. They also argue that when profit is the only factor in making production decisions, the safety of the worker and consumer often slips through the cracks leading to dangerous working conditions and products.

Interactive exercise. Assistance may be required. Below is a list of the effects of an unregulated economy. Put each item in the correct category as either an advantage or disadvantage.

Take a moment to write about your opinion in your notes. Is Adam Smith's idea of Free Enterprise correct or are critics of this system correct? Explain your answer.