Final answer:
Laissez-faire economics is a theory that supports minimal governmental intervention in the economy, and was predominant during the late 1800s in America. The Great Depression led to a shift toward Keynesian policies, which emphasized government intervention to stimulate economic growth.
Step-by-step explanation:
Laissez-faire economics is a theory that endorses minimal government intervention in the economy, assuming that the free market's natural forces will guide economic activity and promote growth. It held prominence in America during the late 1800s, a time of rapid industrialization, where businesses could operate with little to no government interference. The notion is closely associated with Adam Smith, who argued in favour of this economic concept as beneficial for overall prosperity, guided by an 'invisible hand' that any government interference would disrupt.
However, the advent of the Great Depression in the 1930s led to a reevaluation of this hands-off approach. Keynesian economic policies soon gained traction, with an emphasis on government intervention to stimulate economic activity through consumer spending and counter economic downturns. This shift marked a transition from a purely laissez-faire stance towards a more regulated economy embodying both free-market principles and government checks to prevent issues such as monopolies and unsafe working conditions.
The concept of laissez-faire economics still has followers today, particularly amongst libertarians who advocate for a minimum government role in the economy. The debate on the extent and form of government intervention in the economic sector is ongoing, reflecting the balance between freedom and regulation in market dynamics.