The Physiocratic School

Francois Quesnay (1694 - 1774) (1)

- Francois Quesnay was the founder and leader of the Physiocratic school. - He was a physician by profession (of Louis XV and Madame de Pompadour). - The term "Physiocracy" is derived from the Greek, meaning the "rule of nature." - The Physiocrats believed in "natural order," by which they meant the man-made laws should be in harmony with "natural laws."

The Essence of the Physiocratic School (2)

- Physiocrats believed that only the landowners should be taxed, for it is only in agriculture that a surplus could be produced - Physiocrats looked at the economy as a whole, and analyzed the circular flow of wealth

The Essence of the Physiocratic School (1)

- Physiocrats believed that wealth is derived from land, and thus from agricultural activities. - To them industry and trade were useful, but not productive; they were sterile. - Professions in industry, trade, and the like are only reproducing what they have already consumed; what they received from the surplus of agricultural lands.

Francois Quesnay (1694 - 1774) (2)

- Quesnay is famous for his Tableau of Economique (1758), where he depicted the circular flow of goods and money in an ideally free competitive economy - The Tableau was the first systematic analysis of the flow of wealth, what is later became the basis of macroeconomics - Smith, Marx, and Keynes have paid tribute to Quesnay for his pioneership in introducing this approach

Disintegration of the Physiocratic School (2)

- The Physiocratic school did not last more than two decades - It disintegrated by 1776 when Adam Smith published his An Inquiry into the Nature and Causes of the Wealth of Nations - However, their main contribution, the notion of surplus, lived on until it finally found its scientific formulation as the theory of surplus value in the works of Marx.

The Physiocratic School

- The Physiocrats appeared in France toward the end of the mercantilist epoch. - This school of thought can be dated back to 1756, when Francois Quesnay published his first article on economics in the Grande Encyclopedia.

Disintegration of the Physiocratic School (1)

- There was something in the Physiocratic doctrine for almost everybody to object to: - Landowners for being the only direct taxpayers; - Manufacturers and merchants for being disapproved as sterile classes (and so being threatened for losing their exclusive privileges as the elite classes); - And guilds for being asked to dissolve themselves.