het

• The physiocrats appeared in France towards the end of the mercantilist epoch
• Francois Quesnay published his first article on economics in the Grande Encyclopede


  1756
• Publication of Adam Smith's Wealth of Nations and the downfall of Anne Robert Jacques Turgot


  1776
• Physiocracy was not just a furthering and refinement of the mercantilist doctrine or a modification of it. It was basically a reaction against mercantilism and was offering an alternative political and social system
• Mercantilism was characterized by all sorts of restrictions, controls and regulations. In contrast to that, physiocracy was claiming to be a natural system, based upon a belief that there existed natural laws, which ought to be followed for stability and all round benefit
• Physiocracy had a wide following and was commanding almost a religious fervor. Important personalities tried to understand its principles and even apply them
• Physiocrats are credited with the creation of the earliest school of thought in proper sense of the term. Physiocracy marked the rise of the first school of economic thought
• The physiocrats preferred to be called (or called themselves) "economists" but posterity has agreed to call them 'physiocrats'
• Factors which gave rise to physiocracy in France

  • Regulation forces adopted under mercantilism had exhausted their resourcefulness, agriculture was in a miserable condition, mercantilism had outlived its usefulness
  • Degenerated and corrupt court life, luxurious and wasteful public expenditure
  • Inequitable and unjust taxes, further adding to the miseries of the poor people
• Natural Order (or Natural Law)


  Governs human actions, not less than the rest of the field of nature
• Types of natural laws

  • Natural physical laws
  • Natural moral laws
• Natural physical laws


  Govern the physical universe, bring both good and bad events
• Natural moral laws


  Rule human societies, produce beneficial results
• Human society is subject to two kinds of laws: the natural laws (Lois naturelles) and the positive laws (Lois positives)
• Natural law


  The providential order decreed by God for the welfare of mankind, universal and unchangeable, expression of the will of God
• Positive laws


  Of human origin, strictly subordinate to natural laws, should only be introduced in so far as they are in conformity with, and rigorously subject to, the natural laws
• Physiocrats


  • The institution of private property is the fundamental institution on which all other institutions of the society depend
  • Advocated 'laissez-faire, laissez-passer', attacking the protectionist principle of the mercantilists and greater government action
• Agriculture


  For the physiocrats, agriculture alone produced the wealth of a nation, all other occupations although necessary are 'unproductive' and 'sterile'
• Quesnay developed his famous 'Tableau Economique', showing the circular flow of goods in an economy
• Tableau Economique


  Represents the first systematic analysis of the flow of wealth on a macroeconomic basis, paid tribute by economists like Smith, Marx, and Keynes
• Quesnay assumed that the land is owned by landlords but is cultivated by tenant farmers, who are the only really productive class
• Quesnay did not question the right of the proprietors of the soil to receive rent, as he said nature produces the surplus, not the worker, and the land owner is entitled to the surplus product as he makes the original capital investment in land