The Physiocrats were a group of French Enlightenment thinkers of the 1760s that surrounded the French court physician, François Quesnay. The founding document of Physiocratic school was Quesnay's Tableau Économique (1759). The inner circle included the Marquis de Mirabeau, Mercier de la Rivière, Dupont de Nemours, Le Trosne, the Abbé Baudeau and a handful of others. To contemporaries, they were often referred to simply as les économistes.
The cornerstone of the Physiocratic doctrine was François Quesnay's (1759, 1766) axiom that only agriculture yielded a surplus -- what he called a produit net (net product). Manufacturing and commerce, the Physiocrats argued, took up as much value as inputs into production as it created in output, and consequently created no net product. Like many Enlightenment thinkers, and contrary to the Mercantilists, the Physiocrats believed that the wealth of a nation lay not in its stocks of gold and silver, but rather in the size of its net product. But it was the identification of that net product solely with agriculture that the Physiocrats were distinct.
The Physiocrats argued that the old Colbertiste policies of encouraging commercial and industrial corporations was wrong-headed. It is not that commerce and manufacturing should be discouraged, they said, but rather that it is not worthwhile for the government to distort the whole economy with monopolistic charters, controls and protective tariffs to prop up sectors which produced no net product and thus added no wealth to a nation. Government policy, if any, should be geared to maximizing the value and output of the agricultural sector.
But how? French agriculture at the time was still trapped in Medieval regulations which shackled enterprising farmers. Latter-day feudal obligations -- such as the corvée, the yearly labor farmers owed to the state -- were still in force. The monopoly power of the merchant guilds in towns did not permit farmers to sell their output to the highest bidder and buy their inputs from cheapest source. An even bigger obstacle were the internal tariffs on the movement of grains between regions, which seriously hampered agricultural commerce. Public works essential for the agricultural sector, such as roads and drainage, remained in a deplorable state. Restrictions on the migration of agricultural laborers meant that a nation-wide labor market could not take shape. Farmers in productive areas of the country faced labor shortages and inflated wage costs, thus forcing them to scale down their activities. In unproductive areas, in contrast, masses of unemployed workers wallowing in penury kept wages too low and thus local farmers were not encouraged to implement any more productive agricultural techniques.
It is at this point that the Physiocrats jumped into their laissez-faire attitude. They called for the removal of restrictions on internal trade and labor migration, the abolition of the corvée, the removal of state-sponsored monopolies and trading privileges, the dismantling of the guild system, etc.
On fiscal matters, the Physiocrats famously pushed for their "single tax" on land rents -- l'impôt unique. The Physiocrats argued that as land is the only source of wealth, then the burden of all taxes ultimately bears down on the landowner. So instead of levying a complicated collection of scattered taxes (which are difficult to administer and can cause temporary distortions), it is most efficient to just go to the root and tax land rents directly.
However practical many of the Physiocrats' policy measures were, they wrapped their arguments in metaphysical clouds. They differentiated between the ordre naturel (natural order, or the social order dictated by nature's laws) and the ordre positif (positive order, or the social order dictated by human ideals). They charged that social philosophers had gotten both of these mixed up. The ordre positif was wholly about man-made conventions, about how society should be organized to conform to some human-constructed ideal. This, they argued, was what the "natural law" and "social contract" philosophers, like Locke and Rousseau, were concerned with. However, there was, the Physiocrats argued, nothing "natural" in them at all -- and so these theories ought to be dumped. In contrast, the ordre naturel were the laws of nature, which were God-given and unalterable by human construct. The believed that the only choice humans had was either to structure their polity, economy and society in conformity with the ordre naturel or to go against it.
The Physiocrats felt that they had figured out what the ordre naturel actually was. They believed that the policies they prescribed would bring it about. The term "Physiocracy" itself (introduced by Dupont de Nemours (1767)) literally translates to "the rule of nature".
So what was this ordre naturel? The economics of it are simple. The Physiocrats identified three classes of the economy: the "productive" class (agricultural laborers and farmers), the "sterile" class (industrial laborers, artisans and merchants) and the "proprietor" class (who appropriated the net product as rents). Incomes flowed from sector to sector, and thus class to class. A "natural state" of the economy emerged when these income flows were in a state of "balance", i.e. where no sector expanded and none contracted. Once the "natural state" was achieved, the economy just continued humming along, reproducing itself indefinitely. The Physiocrats explained their system in the famous Tableau Économique (1758) of François Quesnay. (click here for an analysis of Quesnay's Tableau).
It has been argued that Quesnay developed this idea because, as a physician, he drew an analogy with the circulation of blood and the "homeostasis" of a body. But, in truth, the idea of a natural balance of income flows had already been expounded in the economic theories of Pierre de Boisguilbert and Richard Cantillon. Indeed, the Physiocrats also owed to Cantillon their "land theory of value". (see our review of Cantillon's sytem).
It is interesting to note that the Physiocrats defended their laissez-faire policy conclusions not merely by pragmatic arguments about improving agricultural production, but more often by mystical views about the role of the government in their ordre naturel. The Physiocrats, unlike some of their contemporaries, continued to view the State as a parasitical entity. It lives off the economy and society, but it is not part of it. Government has no prescribed place in the ordre naturel. Its only role is to set the laws of men in a way that permits the God-given laws of nature to bring the natural order about. Any attempt by the government to influence the economy against these natural forces leads to imbalances which postpone the arrival of the natural state and keep the net product below what it would otherwise be. A general laissez-faire policy and the "single tax" were the speediest, least distortionary and least costly ways of arriving at the natural state.
The Physiocrats believed that net product of the natural state was the maximum net product sustainable over the long-run. Unlike the Mercantilists, the Physiocrats did not really spend too much time thinking about whether maximizing the net product was a "good" idea (e.g. did it enhance the power of the sovereign? did it produce general happiness? did improve general morality?, etc.). Following up on Cantillon, the "friend of mankind", Mirabeau (1756) mumbled something about the true wealth of a nation being its population, ergo the greater the net product, the greater the population sustainable. But most of them focused on the fact that it was the "natural" thing to do. And anything that is "natural", according to the spirit of the age, was the "good" thing to do.
The policy measures advocated by the Physiocrats were sometimes identified with the interests of the nobility and the landed gentry, despite their single tax falling entirely upon them. They earned much opposition from the Neo-Colbertistes of the age, who felt France must continue to endeavor to become a commercial and industrial power, like the Netherlands or England. Because Quesnay was the private physician to Madame de Pomapadour, the mistress of Louis XV, the Physiocratic clique enjoyed a good degree of protection in the French court.
However, after Pompadour's death in 1764, the Physiocrats influence diminished somewhat at Court. However, it was precisely around this time that the Physiocrats decided to expand their influence and take their message to the population at large. The Marquis de Mirabeau launched his celebrated "Tuesday dinners" at his home in Paris. Quesnay did not attend, but the Physiocratic sect made it their "public" headquarters to recruit new members. Dupont de Nemours took charge of disseminating the doctrine in print. In 1765-7, the Physiocrats were publishing furiously in the Journal d'agricultures, du commerce et des finances, which DuPont was then editing with a dogmatic zeal. Some of Quesnay's own early economic writing were barred from publication by DuPont for not being "Physiocratic" enough! After DuPont was removed in 1767, the Physiocrats switched to the Ephémérides du Citoyen run by the Abbé Baudeau. In 1767, DuPont de Nemours published his Physiocratie, the definitive statement of the school doctrine.
The Physiocrats' own style did not help their case. Their dogmatism, their pompousness, their mysticism about the ordre naturel, their "rituals" at Mirabeau's Tuesday dinners, the affected, flowery way in which they wrote their tracts, their petty "cliquishness", their unrestrained adulation and worship of Quesnay -- whom they referred to as the "Confucius of Europe", the "modern Socrates" -- irked just about everybody around them. Even those who ought to be their natural allies, such as Voltaire, Diderot, Rousseau and de Mably, despised the Physiocrats with a passion. In a letter to Morellet regarding his upcoming Dictionnaire, the otherwise good-natured David Hume expressed his disdain for them thus:
"I hope that in your work you will thunder them, and crush them, and pound them, and reduce them to dust and ashes! They are, indeed, the set of men the most chimerical and most arrogant that now exist, since the annihilation of the Sorbonne." (Hume, Letter to Morellet, July 10, 1769)
Adam Smith killed them with faint praise, arguing that the Physiocratic system "never has done, and probably never will do any harm in any part of the world" (Smith, 1776).
Ferdinando Galiani saw them as anything but harmless. For him, the Physiocrats were a dangerous group of impractical men with wrong ideas. In 1768, as France collapsed in a near-famine, the Physiocrats still called for "non-action", muttering on about their ordre naturel and the glorious wisdom of Quesnay. This galvanized Galiani and his followers into making their own remarkable contributions in opposition.
Opposition to the Physiocrats also energized the Neo-Colbertistes. François Veron de Forbonnais and Jean Graslin sharpened and modernized Mercantilist doctrines, bringing them in touch with the Enlightenment spirit partly in order to combat the Physiocrats' appeal.
As a contemporary writer has noted, although the Physiocratic system was accused of being "mysticism parading as science", the truth was perhaps quite the opposite. Physiocracy was more "science parading as mysticism". For this reason, the Physiocrats still exerted a considerable amount of influence on the development of economics. Of particular interest are the modifications introduced by Jacques Turgot and his followers, which we might call a distinctive "Turgotian" sect. They moved away from Physiocratic dogmatism by arguing that industry, and not only agriculture, could also produce a net product. The modified Turgotian system, when channeled into the hands of Adam Smith, would yield up the "labor theory of value" of the Classical School.
Still, for a brief period, the Physiocrats and their ideas were sought everywhere. The rulers of Baden, Sweden, Tuscany, Poland, Russia, Austria and even the United States, consulted the Physiocrats. The high-water mark of their influence was Jacques Turgot's brief tenure as contrôleur général of France from 1774 to 1776. Under Turgot, many of the Physiocratic policy propositions -- e.g. the lifting of internal tariffs, the abolition of the corvée, the single tax -- were instituted. During this period, the Physiocrats exploded into print again with the short-lived Nouvelles Ephémérides Economiques (1774-1776). However, with the fall of Turgot in 1776, his reforms were reversed and the Physiocrats were tossed, once again, out of the limelight.
The Physiocratic Sect
The Turgotian Sect
The German Physiocrats [See also Neo-Cameralism]
Resources on the Physiocrats
All rights reserved, Gonçalo L. Fonseca