Physiocracy (; from the Greek for "government of nature") is an economic theory developed by a group of 18th-century Age of Enlightenment French economists. They 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, All "industrial" and non-agricultural labors were "unproductive appendages" to agricultural labor. 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.
History
Ancient precursors
Physiocracy is an agrarianist philosophy which developed in the context of the predominantly rural, pre-industrial European society of the time. 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.
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 Confucians 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 Taoism term wu wei. The concept natural order of physiocracy originated from "Way of Nature" of Chinese Taoism.
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 ('the royal tithe'): 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. He elaborated a commentary of this text that gradually became his (Friend of men).
Around the time of the Seven Years' War between France and England (1756–1763), the physiocracy movement grew. Several journals appeared, signaling an increasing audience in France for new economic ideas. Among the most important were the (1721–1772), which promoted agronomy and rational husbandry, and the (1759–1762), which was heavily influenced by the Irishman Richard Cantillon (1680–1734), both dominated by physiocrats; the (1765–1774) and the (Citizen's Ephemeris; 1767–1772 and 1774–1776). who appear 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 is a modern Georgist political movement which seeks to revive elements of physiocracy.
Tableau économique
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. 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).