Physiocracy (; from the

Greek Greek may refer to: Greece Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group. *Greek language, a branch of the Indo-European language family. **Proto-Greek language, the assumed last common ancestor ...

for "government of nature") is an

economic theory Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...

developed by a group of 18th-century

Age of Enlightenment The Age of Enlightenment or the Enlightenment; german: Aufklärung, "Enlightenment"; it, L'Illuminismo, "Enlightenment"; pl, Oświecenie, "Enlightenment"; pt, Iluminismo, "Enlightenment"; es, La Ilustración, "Enlightenment" was an intel ...

French

economists An economist is a professional and practitioner in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this field there are ...

who believed that the wealth of nations derived solely from the value of "land

agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people t ...

" or " land development" and that agricultural products should be highly priced. Their theories originated in

France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan area ...

and were most popular during the second half of the 18th century. Physiocracy became one of the first well-developed theories of

economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...

. François Quesnay (1694–1774), the marquis de Mirabeau (1715–1789) and

Anne-Robert-Jacques Turgot Anne Robert Jacques Turgot, Baron de l'Aulne ( ; ; 10 May 172718 March 1781), commonly known as Turgot, was a French economist and statesman. Originally considered a physiocrat, he is today best remembered as an early advocate for economic lib ...

(1727–1781) dominated the movement,Steiner (2003), pp. 61–62 which immediately preceded the first modern school, classical economics, which began with the publication of Adam Smith's ''

The Wealth of Nations ''An Inquiry into the Nature and Causes of the Wealth of Nations'', generally referred to by its shortened title ''The Wealth of Nations'', is the '' magnum opus'' of the Scottish economist and moral philosopher Adam Smith. First published in ...

'' in 1776. The physiocrats made a significant contribution in their emphasis on productive work as the source of national wealth. This contrasted with earlier schools, in particular mercantilism, which often focused on the ruler's wealth, accumulation of gold, or the

balance of trade The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...

. Whereas the mercantilist school of economics held that value in the products of society was created at the point of sale, by the seller exchanging his products for more money than the products had "previously" been worth, the physiocratic school of economics was the first to see

labor Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the la ...

as the sole source of value. However, for the physiocrats, only agricultural labor created this value in the products of society.Karl Marx and Frederick Engels (1988), pp. 348, 355, 358. All "industrial" and non-agricultural labors were "unproductive appendages" to agricultural labor. Quesnay was likely influenced by his medical training. The earlier work of William Harvey had explained how blood flow and the circulatory system is vital to the human body; Quesnay held that the circulation of wealth was vital to the economy. Societies at the time were also overwhelmingly agrarian. This may be why they viewed agriculture as the primary source of a nation's wealth. This is an idea which Quesnay purported to demonstrate with data, comparing a workshop to a farm. He analyzed "how money flowed between the three classes of farmers, proprietors, and artisans, in the same mechanical way that blood flows between different organs" and claimed only the farm produced a surplus that added to the nation's wealth. Physiocrats viewed the production of

goods and services Goods are items that are usually (but not always) tangible, such as pens, physical books, salt, apples, and hats. Services are activities provided by other people, who include architects, suppliers, contractors, technologists, teachers, doc ...

as equivalent to the

consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...

of the agricultural surplus, since human or animal muscle provided the main source of power and all energy derived from the surplus from agricultural production. Profit in capitalist production was really only the "rent" obtained by the owner of the land on which the agricultural production took place. "The physiocrats damned cities for their artificiality and praised more

natural Nature, in the broadest sense, is the physical world or universe. "Nature" can refer to the phenomena of the physical world, and also to life in general. The study of nature is a large, if not the only, part of science. Although humans are ...

styles of living. They celebrated farmers." They called themselves ''les Économistes'', but are generally referred to as "physiocrats" to distinguish their beliefs from the many schools of economic thought that followed. ''The Penguin Dictionary of Economics'', George Bannock, R. E. Baxter and Evan Davis. 5th Edition. Penguin Books 1992 p. 329.

Precursors

Physiocracy is an agrarianist philosophy which developed in the context of the prevalent European rural society of the time. In the late

Roman Republic The Roman Republic ( la, Res publica Romana ) was a form of government of Rome and the era of the classical Roman civilization when it was run through public representation of the Roman people. Beginning with the overthrow of the Roman Ki ...

, the dominant senatorial class was not allowed to engage in banking or commerceByrd (1995), 34 but relied on their ''

latifundia A ''latifundium'' (Latin: ''latus'', "spacious" and ''fundus'', "farm, estate") is a very extensive parcel of privately owned land. The latifundia of Roman history were great landed estates specializing in agriculture destined for export: grain, o ...

'', large plantations, for income. They circumvented this rule through freedmen proxies who sold surplus agricultural goods. Other inspiration came from China's economic system, then the largest in the world. Chinese society broadly distinguished

four occupations The four occupations () or "four categories of the people" ()Hansson, pp. 20-21Brook, 72. was an occupation classification used in ancient China by either Confucian or Legalist scholars as far back as the late Zhou dynasty and is considered a cen ...

, with

scholar-bureaucrats The scholar-officials, also known as literati, scholar-gentlemen or scholar-bureaucrats (), were government officials and prestigious scholars in Chinese society, forming a distinct social class. Scholar-officials were politicians and governmen ...

(who were also agrarian landlords) at the top and merchants at the bottom (because they did not produce but only distributed goods made by others). Leading physiocrats like François Quesnay were avid Confucianists who advocated China's agrarian policies.Derk Bodde (2005)
Chinese Ideas in the West
p.6, Reprinted with permission in China: A Teaching Workbook, Asia for Educators, Columbia University Some scholars have advocated connections with the school of

agriculturalism Agriculturalism, also known as the School of Agrarianism, the School of Agronomists, the School of Tillers, and in Chinese as the ''Nongjia'' (), was an early agrarian Chinese philosophy that advocated peasant utopian communalism and egalitariani ...

, which promoted utopian communalism. One of the integral parts of physiocracy,

laissez-faire ''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups ...

, was adopted from Quesnay's writings on China, being a translation of the Chinese term

wu wei ''Wu wei'' () is an ancient Chinese concept literally meaning "inexertion", "inaction", or "effortless action". ''Wu wei'' emerged in the Spring and Autumn period, and from Confucianism, to become an important concept in Chinese statecraft and T ...

. The concept natural order of physiocracy originated from "Way of Nature" of Chinese Taoism.

History

The growing power of the centralized state control in the era of enlightened absolutism necessitated centralized, systematic information on the nation. A major innovation was the collection, use and interpretation of numerical and statistical data, ranging from trade statistics, harvest reports, and death notices to population censuses. Starting in the 1760s, officials in France and Germany began increasingly to rely on quantitative data for systematic planning, especially regarding long-term economic growth. It combined the utilitarian agenda of "enlightened absolutism" with the new ideas being developed in economics. In Germany the trend was especially strong in

Cameralism Cameralism ( German: ''Kameralismus'') was a German science of public administration in the 18th and early 19th centuries that aimed at strong management of a centralized economy for the benefit mainly of the state. The discipline in its most n ...

while in France it was an important theme in physiocracy. Pierre Le Pesant, sieur de Boisguilbert served as a member of

Louis XIV , house = Bourbon , father = Louis XIII , mother = Anne of Austria , birth_date = , birth_place = Château de Saint-Germain-en-Laye, Saint-Germain-en-Laye, France , death_date = , death_place = Palace of Ver ...

's local administration of Paris, and wrote pamphlets and booklets on subjects related to his work: taxation, grain trade, and money. Le Pesant asserted that wealth came from

self-interest Self-interest generally refers to a focus on the needs or desires (''interests'') of one's self. Most times, actions that display self-interest are often performed without conscious knowing. A number of philosophical, psychological, and econom ...

and markets were connected by money flows (i.e. an expense for the buyer is revenue for the producer). Thus he realized that lowering prices in times of shortage – common at the time – was dangerous economically as it acted as a disincentive to production. Generally, Le Pesant advocated less government interference in the grain market, as any such interference would generate "anticipations" which would prevent the policy from working.Steiner (2003), p. 61 For instance, if the government bought corn abroad, some people would speculate that there was likely to be a shortage and would buy more corn, leading to higher prices and more of a shortage. This was an early example of advocacy of free trade. In anonymously published tracts, Vauban proposed a system known as ''La dîme royale'': this involved major simplification of the French tax code by switching to a relatively flat tax on property and trade. Vauban's use of statistics contrasted with earlier empirical methods in economics. The event that led

Mirabeau Mirabeau may refer to: People and characters * Mirabeau B. Lamar (1798–1859), second President of the Republic of Texas French nobility * Victor de Riqueti, marquis de Mirabeau (1715–1789), French physiocrat * Honoré Gabriel Riqueti, com ...

to devote himself to political economy was undoubtedly his work on a manuscript of Richard Cantillon's ''Essai sur la nature du commerce en général'', which he had in his possession as early as 1740. He elaborated a commentary of this text that gradually became his ''Ami des hommes''. Around the time of the

Seven Years' War The Seven Years' War (1756–1763) was a global conflict that involved most of the European Great Powers, and was fought primarily in Europe, the Americas, and Asia-Pacific. Other concurrent conflicts include the French and Indian War (175 ...

between France and England (1756–63), the physiocracy movement grew. Several journals appeared, signaling an increasing audience in France for new economic ideas. Among the most important were the ''Journal Œconomique'' (1721–72), which promoted agronomy and rational

husbandry Animal husbandry is the branch of agriculture concerned with animals that are raised for meat, fibre, milk, or other products. It includes day-to-day care, selective breeding, and the raising of livestock. Husbandry has a long history, startin ...

and the ''Journal du commerce'' (1759–62), which was heavily influenced by the Irishman Richard Cantillon (1680–1734), both dominated by physiocrats; the ''Journal de l'agriculture, du commerce et des finances'' (1765–74) and the ''Ephémérides du citoyen'' (1767–72 and 1774–76). Also,

Vincent de Gournay Jacques Claude Marie Vincent de Gournay (; 28 May 1712, Saint-Malo – 27 June 1759, Cádiz), a French economist, became an intendant of commerce. Some historians of economics believe that he coined the phrase '' laissez faire, laissez passer''. ...

(1712–1759), the Intendant du commerce, brought together a group of young researchers including François Véron Duverger de Forbonnais (1722–1800) and one of the two most famous physiocrats,

(1727–1781). The other, François Quesnay (1694–1774), was among those writing prolifically in contemporaneous journals. In the 19th century

Henry George Henry George (September 2, 1839 – October 29, 1897) was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the eco ...

in the United States advocated the collection of

land rent In economics, economic rent is any payment (in the context of a market transaction) to the owner of a factor of production in excess of the cost needed to bring that factor into production. In classical economics, economic rent is any payment m ...

as the primary if not the sole source of public revenue.

''Tableau économique''

The ''

Tableau économique The Tableau économique () or ''Economic Table'' is an economic model first described by French economist François Quesnay in 1758, which laid the foundation of the Physiocratic school of economics.Henry William Spiegel (1983) ''The Growth of Ec ...

'' or ''Economic Table'' is an economic model first described by François Quesnay in 1759, which laid the foundation of the physiocrats’ economic theories.Henry William Spiegel (1983) ''The Growth of Economic Thought'', Revised and Expanded Edition, Duke University Press. pp. 189, 195–96 It also contains the origins of modern ideas on the circulation of wealth and the nature of interrelationships in the economy. The model Quesnay created consisted of three economic agents: the "proprietary" class consisted only of landowners; the "productive" class consisted of agricultural laborers; the "sterile" class was made up of artisans and merchants. The flow of production and cash between the three classes originated with the proprietary class because they owned the land and bought from both of the other classes.

Characteristics

Natural order

The physiocrats thought there was a " natural order" that allowed human beings to live together. Men did not come together via a somewhat arbitrary " social contract." Rather, they had to discover the laws of the natural order that would allow individuals to live in society without losing significant freedoms. This concept of natural order had originated in China. The Chinese had believed that there can be good government only when a perfect harmony exists between the "Way of Man" (governmental institutions) and the "Way of Nature" (Quesnay's natural order).

Individualism and laissez-faire

The physiocrats, especially thought, believed that self-interest was the motivation for each segment of the economy to play its role. Each individual is best suited to determine what goods they want and what work would provide them with what they want out of life. While a person might labor for the benefit of others, they will work harder for their own benefit; however, each person's needs are being supplied by many other people. The system works best when there is a complementary relationship between one person's needs and another person's desires, and so trade restrictions place an unnatural barrier to achieving one's goals. Laissez-faire was popularized by physiocrat

who is said to have adopted the term from François Quesnay's writings on China.

Private property

None of the theories concerning the value of land could work without strong legal support for the ownership of private property. Combined with the strong sense of individualism, private property becomes a critical component of the Tableau's functioning. The physiocrats believed in the institution of private property. They saw property as a tree and its branches, as social institutions. They actually stated that landlords must enjoy 2/5 on the land surpluses. They also advocated that landlords should be given dues, otherwise they would take the land away from the cultivators.

Diminishing returns

Turgot was one of the first to recognize that "successive applications of the variable input will cause the product to grow, first at an increasing rate, later at a diminishing rate until it reaches a maximum." This was a recognition that the productivity gains required to increase national wealth had an ultimate limit, and, therefore, wealth could not be infinite.

Investment capital

Both Quesnay and Anne Robert Jacques Turgot, Baron de Laune recognized that capital was needed by farmers to start the production process, and both were proponents of using some of each year's profits to increase productivity. Capital was also needed to sustain the laborers while they produced their product. Turgot recognizes that there is opportunity cost and risk involved in using capital for something other than land ownership, and he promotes interest as serving a "strategic function in the economy.”

Subsequent developments

The ideas of the Physiocrats had an influence on Adam Smith,

David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist. He was one of the most influential of the classical economists along with Thomas Malthus, Adam Smith and James Mill. Ricardo was also a politician, and a ...

, John Stuart Mill, and above all

, who appears at first to have come to similar beliefs independently. George was the driving force behind what became known as the

Single Tax A single tax is a system of taxation based mainly or exclusively on one tax, typically chosen for its special properties, often being a tax on land value. The idea of a single tax on land values was proposed independently by John Locke and Bar ...

movement (not to be confused with Flat Tax). The Single Tax is a proposal for the use of the annual rental value of land (

land value taxation A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...

) as the principal or sole source of public revenue. ''The New Physiocratic League'' is a current Georgist political movement which seeks to revive elements of physiocracy.

Notes

References

* * Charbit, Yves; Arundhati Virmani (2002
"The Political Failure of an Economic Theory: Physiocracy"
''Population'', Vol. 57, No. 6. (Nov. – Dec., 2002), pp. 855–883, Institut National d'Études Démographiques * "Theories of Surplus Value" from the Economic Manuscripts of 1861–1863" contained in ''Collected Works of Karl Marx and Frederick Engels: Volume 30,'' New York: International Publishers, 1988. * Gide, Charles and

Charles Rist Charles Rist (1 January 1874, Prilly – 10 January 1955, Versailles) was a French economist. His son is Léonard Rist Léonard Rist (1905–1982) was a French economist and banker. He was the son of Charles Rist, the economist. Working in Ame ...

br>A History of Economic doctrine from the time of the Physiocrats to the present day
1915 * Muller, A. L. (1978
''Quesnay's Theory of Growth: A Comment''
Oxford Economic Papers, New Series, Vol. 30, No. 1., pp. 150–156. * * Spiegel, Henry William (1983), ''The Growth of Economic Thought'', Revised and Expanded Edition,

Duke University Press Duke University Press is an academic publisher and university press affiliated with Duke University. It was founded in 1921 by William T. Laprade as The Trinity College Press. (Duke University was initially called Trinity College). In 1926 D ...

* Steiner, Phillippe (2003
"Physiocracy and French Pre-Classical Political Economy"
Chapter 5. in eds. Biddle, Jeff E, Davis, Jon B, & Samuels, Warren J.: ''A Companion to the History of Economic Thought''. Blackwell Publishing, 2003. * ''The History of Economic Thought Website'',

The New School of Social Research The New School is a private research university in New York City. It was founded in 1919 as The New School for Social Research with an original mission dedicated to academic freedom and intellectual inquiry and a home for progressive thinkers. ...

. 6 Feb. 2006
Tableau Économique – Modern view
* Vinje, Victor Condorcet: ''Economics as if Soil and Health Matters''(Nisus Publications, 2017)

External links

The Physiocrats
– In Our Time – BBC Radio 4, 2013 {{Authority control Classical liberalism Preclassical economics Agrarianism Land value taxation Georgism Schools of economic thought