Physiocrats
Part of the series where I am trying to learn more about each of the major economic schools of thought.
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References
Notes
Physiocracy us an economic theory developed by a group of 18th-century Age of Enlightenment French economists who believed that the wealth of nations derived solely from the value ofland agricultureorland developmentand that agricultural products should be highly priced. Their theories originated in France and were most popular during the second half of the 18th century. Physiocracy became one of the first well-developed theories of economics.
François Quesnay (1694–1774), the marquis de Mirabeau (1715–1789) and Anne-Robert-Jacques Turgot (1727–1781) dominated the movement, which immediately preceded the first modern school, classical economics.
They made a significant contribution in economics due to their emphasis on productive work as the source of national wealth. The physiocratic school of economics was the first to see labor as the sole source of value (The mercantilists saw value being created only at the point of sale).
For physiocrats, only agricultural labor created this value in the products of society; all industrial
and non-agricultural labors were unproductive appendages
to agricultural labor.
Societies at the time were overwhelmingly agrarian, which may be why they viewed agriculture as the primary source of a nation's wealth.
The physiocrats damned cities for their artificiality and praised more natural styles of living. They celebrated farmers.
Precursors
- In the late Roman Republic, the dominant senatorial class was not allowed to engage in banking or commerce, but relied on their latifundia, large plantations, for income. They circumvented this rule through freedmen proxies who sold surplus agricultural goods.
- Leading physiocrats were avid Confucianists who advocated China's agrarian policies.
- The Chinese broadly distinguished four occupations, with scholar-bureaucrats (who were agrarian landlords) at the top and merchants at the bottom (because they did not produce but only distributed goods made by others).
History
- The growing power of the centralized state control in the era of enlightened absolutism necessitated centralized, systematic information on a 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.
- Officials in France and Germany began to rely on quantitative data for systemic planning in the 1760s. In Germany, the trend was associated with Cameralism while in France it was important theme in physiocracy.
- Around the time of the Seven Years War, the physiocracy movement grew. Several journals appeared advocating the economic system.
Tableau economique
- English:
Economic Table
is an economic model first described by François Quesnay in 1759, which laid the foundation of the physiocrats' economic theories. - The model 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
- 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 idea of natural order originated in China. The Chinese had believed that there can be good government only when a perfect harmony exists between the
Way of Men
and theWay of Nature
.
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.
Individualism and laissez-faire
- The Physiocrats recognized that the societal economic system works best when there is a complimentary relationship between one person's needs and another person's desires, and so trade restrictions place an unnatural barrier to achieving one's goals.
- The term Laissez-fair was popularized by physiocrat Vincent de Gournay who is said to have adopted the term from François Quesnay's writings on China.
Private Property
- They believed in the institution of private property. They saw property as a tree and social institutions as its branches. They actually stated that landlords must enjoy 2/5 of their land surpluses.
- They advocated that landlords should be given dues, otherwise they would take the land away from the cultivators.
Diminishing Returns
- The Physiocrats recognized that the productivity gains required to increase the national wealth had an ultimate limit, and, therefore, wealth could not be infinite.
Investment Capital
- They recognized that capital was needed for farmers to start the production process. Some were proponents of using part of each year's profits to increase productivity.
Subsequent Development
- The ideas of the Physiocrats had an influence on Adam Smith, David Ricardo, John Stuart Mill, and above all Henry George, who appears to have come to similar beliefs independently.
- The New Physiocratic League is a current Georgist political movement which seeks to revive elements of physiocracy.