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Physiocracy (French : physiocratie; from the Greek for "government of nature") is 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 of "land agriculture" or "land development" and 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, which began with the publication of Adam Smith's The Wealth of Nations 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. 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 as the sole source of value. However, for the physiocrats, only agricultural labor created this value in the products of society. All "industrial" and non-agricultural labors were "unproductive appendages" to agricultural labor.
At the time the physiocrats were formulating their ideas, economies were overwhelmingly agrarian. That is presumably why the theory considered only agricultural labor to be valuable. Physiocrats viewed the production of goods and services as equivalent to the consumption 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 styles of living. They celebrated farmers."They called themselves les Économistes, but are generally referred to as "physiocrats" to distinguish them from the many schools of economic thought that followed them.
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 dominant senatorial class was not allowed to engage in banking or commercebut relied on their latifundia , 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, with scholar-bureaucrats (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.Some scholars have advocated connections with the school of agriculturalism, which promoted utopian communalism. One of the integral parts of physiocracy, laissez-faire, was adopted from Quesnay's writings on China, being a translation of the Chinese term wu wei. The concept natural order of physiocracy originated from "Way of Nature" of Chinese Taoism.
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 while in France it was an important theme in physiocracy.
Pierre Le Pesant, sieur de Boisguilbert served as a member of Louis XIV'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 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.
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 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 what became his Ami des hommes .
Around the time of the Seven Years' War 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 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 (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, Anne-Robert-Jacques Turgot (1727–1781). The other, François Quesnay (1694–1774), was among those writing prolifically in contemporaneous journals.
In the 19th century Henry George in the United States advocated the collection of land rent as the primary if not the sole source of public revenue.
The Tableau économique or Economic Table is an economic model first described by François Quesnay in 1759, which laid the foundation of the physiocrats’ economic theories.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.
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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).
The physiocrats, especially Turgot, 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 Vincent de Gournay who is said to have adopted the term from François Quesnay's writings on China.
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.
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.
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".
The ideas of the Physiocrats had an influence on Adam Smith, David Ricardo, John Stuart Mill, and above all Henry George, who appears at first to have come to similar beliefs independently. George was the driving force behind what became known as the Single Tax 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) as the principal or sole source of public revenue.
The New Physiocratic League, also known as the New Physiocrats, is the most recent development in physiocratic ideology. It introduced a comprehensive platform rooted in the original physiocratic philosophy, and expanded and updated it to be adopted by modern political platforms. The New Physiocrats advocate for an implementation of a variant of the land value tax, which they refer to as the "unified location tax," as a main source of government revenues, while returning all income taxes back to the labour market as an income supplement.
|Wikisource has the text of the 1911 Encyclopædia Britannica article Physiocratic School .|
François Quesnay was a French economist and physician of the Physiocratic school. He is known for publishing the "Tableau économique" in 1758, which provided the foundations of the ideas of the Physiocrats. This was perhaps the first work attempting to describe the workings of the economy in an analytical way, and as such can be viewed as one of the first important contributions to economic thought. His Le Despotisme de la Chine, written in 1767, describes Chinese politics and society, and his own political support for constitutional despotism.
Anne Robert Jacques Turgot, Baron de l'Aulne, 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 liberalism. He is thought to be the first economist to have recognized the law of diminishing marginal returns in agriculture.
Laissez-faire is an economic system in which transactions between private parties are absent of any form of economic interventionism such as regulation and subsidies. As a system of thought, laissez-faire rests on the axioms that the individual is the basic unit in society and has a natural right to freedom; that the physical order of nature is a harmonious and self-regulating system; and that corporations are creatures of the state and therefore the citizens must watch them closely due to their propensity to disrupt the Smithian spontaneous order.
Ferdinando Galiani was an Italian economist, a leading Italian figure of the Enlightenment. Friedrich Nietzsche referred to him as "a most fastidious and refined intelligence" as well as "... the most profound, sharp-sighted and perhaps also the foulest man of his century."
Classical economics or classical political economy is a school of thought in economics that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. Its main thinkers are held to be Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Robert Malthus, and John Stuart Mill. These economists produced a theory of market economies as largely self-regulating systems, governed by natural laws of production and exchange.
Geolibertarianism is a political and economic ideology that integrates libertarianism with Georgism.
Richard Cantillon was an Irish-French economist and author of Essai sur la Nature du Commerce en Général, a book considered by William Stanley Jevons to be the "cradle of political economy". Although little information exists on Cantillon's life, it is known that he became a successful banker and merchant at an early age. His success was largely derived from the political and business connections he made through his family and through an early employer, James Brydges. During the late 1710s and early 1720s, Cantillon speculated in, and later helped fund, John Law's Mississippi Company, from which he acquired great wealth. However, his success came at a cost to his debtors, who pursued him with lawsuits, criminal charges, and even murder plots until his death in 1734.
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 Baruch Spinoza in the 17th century. The French physiocrats later coined the term impôt unique because of the unique characteristics of land and rent.
Victor de Riqueti, Marquis de Mirabeau was a French economist of the Physiocratic school. He was the father of Honoré, Comte de Mirabeau and is, in distinction, often referred to as the elder Mirabeau.
The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction. The circular flow analysis is the basis of national accounts and hence of macroeconomics.
Jacques Claude Marie Vincent de Gournay, a French economist, became an intendant of commerce. Some historians of economics believe that he coined the phrase laissez faire, laissez passer. Evidence was to be found when the French State parted the West Indies Company privilege - monopoly - on the slave trade. He is also credited with coining the term "bureaucracy". Together with François Quesnay, whose disciple he was, he was a leader of the Physiocratic School.
Surplus product is an economic concept explicitly theorised by Karl Marx in his critique of political economy. Marx first began to work out his idea of surplus product in his 1844 notes on James Mill's Elements of political economy.
Ronald Lindley Meek, also known as Ron Meek, was a Marxian economist and social scientist known especially for his scholarly studies of classical political economy and the labour theory of value. During the 1960s and 1970s, his writings had a strong influence on the Western academic discussion about Marx's economic theory.
The history of economic thought deals with different thinkers and theories in the subject that became political economy and economics, from the ancient world to the present day in the 21st Century. This field encompasses many disparate schools of economic thought. Ancient Greek writers such as the philosopher Aristotle examined ideas about the art of wealth acquisition, and questioned whether property is best left in private or public hands. In the Middle Ages, scholasticists such as Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price.
In the history of economic thought, a school of economic thought is a group of economic thinkers who share or shared a common perspective on the way economies work. While economists do not always fit into particular schools, particularly in modern times, classifying economists into schools of thought is common. Economic thought may be roughly divided into three phases: premodern, early modern and modern. Systematic economic theory has been developed mainly since the beginning of what is termed the modern era.
Pacte de Famine was a conspiracy theory adopted by many living in France during the 18th century. The theory held that foods, especially grain, were purposely withheld from them, for the benefit of privileged interest groups. During this period French citizens obtained much of their nourishment from grain.
The following outline is provided as an overview of and topical guide to economics:
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.
Essay on the Nature of Trade in General is a book about economics by Richard Cantillon. Written around 1730, and published in French in 1755. This book was considered by William Stanley Jevons to be the "cradle of political economy".
Achille-Nicolas Isnard was a French political economist and engineer at the Ponts et Chaussées of Paris. He is known for his firm disapproval of the physiocratic theory, and his early contribution to mathematical economics.
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