How would a Laissez-Faire/hands-off government work to solve the problem of a recession?

If consumer demand is down, investment is down, and unemployment is up, how would the economy correct itself with no help from the government?

Well, as the name implies a "hands-off" government wouldn't really do anything to try and ease the economic climate of a recession. Though the misconception is that government intervention can fix the current recession- while what those policies really should be expressed as is

intermediate term (around 5 years or so) relief by the government.

Government employment cannot fix an economy especially if you consider that their plans for infrastructure, roads, bridges, etc. are limited and once those projects are finished- they have not changed the over-all economy (those are not jobs that will last forever, they are limited to the amount of structure that can physically be built).

To reiterate, the economy needs to go through it's natural correction process whether or not government intervention is made; and in fact, intervention should be limited, at least with certain things which FDR (for example) tried, like destroying crops to make them more expensive and price caps, static foreign exchange rates etc which in turn hurt the economy's recovery...

edit: they wouldn't look to "solve" the problem, they would allow it to play out the way it needed to. Markets are organic like a language. They are formed and maintained w/o bureaucrats directing people how to act and react; and the belief is that recessions need to be played out.

There will be innovators and risk takers starting at some point- others follow suit- eventually idiots will come and start the process again. But the economy will be better off than the start of the cycle. It's easy to remember actually, 3 i 's - innovators, imitators and idiots. repeat.

Yes, in the long run we are all dead but a typical recession lasts 1-2 years. Pumping the economy up will set the US up for bigger trouble in the future. The government should let prices find their equilibriums' rather than creating even more commodity bubbles. i.e. the housing bubble WAS created by government intervention and now it has taken down other industries along with it. Business Cycles are to be expected. Government intervention makes them worse, it does not mitigate them like Keynes posited it could. Lassaiz Fair in this context means that the government that governs least, governs best.

If you want to see just how successful the government can steer the economy, take a look at the last two years in the US and watch the next four years of screw ball macroeconomic policy

There are a variety of theories about how the economy recovers, but which one you choose depends on what you think caused it. One assumption people often make, is that a real shock (oil price increase, large scale crop failures, etc) or monetary shock (change in interest rate) moves the economy away from equilibrium, and the economy naturally will find a new equilibrium. Others believe that they are due to previous excesses and that they economy can not recover until they are rung out of the system , sort of a economy wide paying for sins. The pop view is that recessions are due to loss of confidence, causing people to panic and slowly they will calm down and when confidence is restored everything will be fine. We do know that we have had recession many times in the past and before the 1930's government generally did not intervene and we recovered, but since government started active intervention recessions have been shorter and less frequent.

http://www.visualizingeconomics.com/2008/05/27/us-inflation-annual-percent-change-1774-2007/

It would be a government that run a country into the ground and create chaos from letting monopolies and the mafia over throw itself. Its a term meant to let the people fend for themselves. Too bad for the government the people will organize and rise against. It would have no middle class and disorder would set it.

What Chris and Jonathan fail to understand is that the government creates the business cycle, through endless intervention.

Without "help" from the government, those who make investments and buy things and sell things are more able to know the long-term consequences of their actions.

Axesenzon is right, the Government is just making the problem worse.

in the long-run, we are all dead....

the last 2 answers are dead wrong. The economy isn't a game. Don't treat it like one. The economy will correct itself...yes..but when?

And what does hands-off mean to you? You wrote it, not me.