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Franfois Quesnay and the Physiocrats

The physiocrats (or les economistes, as they used to call themselves) were a very compact and combative group of French economists grouped around Francois Quesnay (1694-1774), doctor to Madame de Pompadour at the court of Louis XV, author of the Tableau economique (1758-59). The physiocrats are the first school of economic thought to have equipped themselves with their own press organs in order to advocate definite points of policy. The span of time that saw them dominant was short - a quarter of a century or little more - but their influence on the development of political economy was significantly strong, thanks also to the central position Paris occupied in the cultural life of the time.

The physiocrats attributed a key role to the development of agriculture, which they considered the only sector capable of producing a surplus. Moreover, as the term they are now designated with shows (physiocracy originates from the Greek fusis = ‘nature’, and cratein = ‘to dominate’), they shared with the Cartesian current of French Enlightenment the idea of a ‘natural order’, the logic and optimality of which - unchanging over time, since it is intrinsic to the very nature of things - should be evident to any person endowed with the light of reason, and which an enlightened prince should implement as ‘positive order’. Private property also falls within this natural order, so the defence of property rights was considered one of the main tasks of the ‘positive order’.

Victor Riqueti, marquis of Mirabeau (1715-1789), and various other physiocrats saw the capacity of agriculture to generate a surplus as being intrinsic to the fertility of the soil (which produces an ear of wheat from a grain) and hence as a gift of mother nature. This theory on the origin of the surplus may then be used to justify appropriation of the surplus by the nobility - not only the rightful owners of the lands but masters of the serfs living on them to boot. Quesnay, too, considered agriculture alone capable of yielding a surplus, although his explanation is somewhat different, taking account of the situation prevailing in France at the time: given the prices of agricultural products and manufactures on the world markets, with recourse to the best technologies French farmers could obtain a product whose value exceeded production costs, while manufacturers simply recovered their costs (including subsistence for manufacturing entrepreneurs). Quesnay thus stressed the potential a reformed agricultural system held for economic development - what he called grande culture, as compared with petite culture, the former characterised not only by larger concerns but also by technologies with higher capital intensity (such as the plough drawn by horses rather than oxen).

Thus, Quesnay stressed the potentialities of an agricultural revolution that had already begun but was proceeding too slowly: a thesis opposed to the mercantilist tradition and above all to Jean-Baptiste Colbert’s (1619-1683) economic policy of supporting commerce and manufactures by liberalising the importation of raw materials and duties on manufacturing imports that hindered the development of agriculture, reducing its profitability while increasing that of manufactures. On the contrary, Quesnay argued, agricultural products should be given a bonprix: a price sufficient not only to cover production costs but also to favour the financing of investments by ensuring adequate returns.

Neither the bon prix nor the prix fondamental (which corresponded to mere costs of production) were prices spontaneously generated by the markets; according to Quesnay, market prices depended on supply and demand. Implementation of the bon prix was thus entrusted to a policy favouring the free exportation of agricultural products and consumption habits within the country such as would encourage the luxe de subsistence as compared with the luxe de decoration, or consumption of agricultural produce - but not of manufactures - in excess of the mere subsistence level.[1] Although the notion of a competitive rate of profits was still wanting (it would be outlined by Turgot a few years later and fully developed by Smith), Quesnay fully recognised the crucial role of capital accumulation for the productive process and above all in allowing improved technologies to be adopted. Quesnay distinguished between avances foncieres (initial basic investments, required for cultivating a piece of land and increasing its productivity), avances primitives (production implements, cattle) and avances annuelles (circulating capital: seed, wages and the like). Quesnay thus focused attention on agriculture; at the same time, however, he made decided strides in the direction, subsequently followed by Turgot, Smith and the whole Classical tradition, of considering capital advances as a requirement for the production and accumulation ofcapital, hence a crucial element for economic development.

Quesnay and the physiocrats developed a theory admirable in its ‘spirit of system’ and consistency. In particular, Quesnay was the first economist to recognise and represent in an analytical scheme the productive interrelations linking the different sectors that, in an economic system based on the division of labour, stemmed from heterogeneity of means of production in each sector. This problem was tackled, with the tableau economique, by focusing on the exchanges required to ensure the continuous functioning of the economic system.

Let us see in broad outline Quesnay’s model. Agriculture was considered the sole productive (i.e. capable of generating a surplus) sector in the economy; Quesnay assumed that the most advanced technology, the grande culture, was generally adopted in agriculture. Other activities were grouped under the ‘sterile sector’ heading, so called because these activities merely transformed into processed products a given set of raw materials (including means of subsistence for the workers of the sector); the value of the processed products proved equal to the value of the means of production and subsistence utilised to obtain them, so that there was no creation of new value. Subdivision of the economic system into sectors corresponded to the subdivision of society into social classes: the productive class composed of those active in agriculture (peasants and farmers), the sterile class composed of artisans (including manufacturing workers and

Obviously, at the logical level the two theses are not mutually exclusive, since they are based on consideration of different aspects of the process of development, hence on cause and effect relationships moving in opposite directions. On the one hand, relatively high prices stemming from high demand constitute a stimulus to production, while a low level of prices may signal difficulty in absorption of the products by the market and may thus constitute a disincentive for producers; on the other hand, increase in productivity accompanying economic development leads, under competitive conditions, to decrease in prices, while high prices signal bottlenecks on the supply side, namely the presence of obstacles to the growth of production.

merchants) and the aristocratic class, the landlords, to which the surplus obtained in the agricultural sector accrued, including together with the nobility the clergy.

The tableau economique, or economic table, consists in a series of graphs, which outlined the series of exchanges of commodities against money between the different productive sectors and the different social classes necessary in order to allow for the survival and development of the economy through a circular process in which, year after year, the phases of production, exchange and consumption follow one upon the other. At the end of the productive cycle, the circulation process is set in motion by the nobility, utilising the money paid them as rent to acquire agricultural and manufactured products. A series of exchanges then follows: the sterile class utilises the money it has received to acquire food and raw materials from the productive class; the latter acquires manufactured products from the sterile class. At the end, the productive class has sold its surplus produce, thus obtaining the money with which to pay the rents to the landlords. A new cycle of production can thus begin. The surplus (what remains of the product, once the means of production and subsistence of the workers in the economy have been reproduced) corresponds to the consumption of the nobility and clergy, who do not produce anything and are able to buy agricultural and manufactured products year after year only because they receive their rents from the productive sector.

In the circular process described by Quesnay the different sectors and social classes are interconnected; the distribution of the product among the different social classes takes place simultaneously with the process of exchanges that allow each sector to reintegrate the initial endowments of means of production and of subsistence. Since the surplus accrues to the landlords, it is obvious that rents alone should bear the entire tax burden. Attempts to bring taxes to fall on other social classes were not only doomed to failure but were also costly for the economic system as a whole, given the disincentive to accumulation and technical change entailed by taxes on farmers, viewed by Quesnay and the physiocrats as the active agents for economic development.

  • [1] The physiocrats thus connected high prices with the idea of a flourishing, developingeconomy, in which high prices are the cause (or one of the causes) and economicabundance is the effect. This view was widely held during the whole of the mercantilistperiod, but far from unanimously, since in many cases high prices were seen as a symptomof dearth. On the contrary, Smith and the Classical economists held that moderate pricesare associated with a situation of abundance, of which they are essentially the effect.
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