Physiocracy

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. 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. == Characteristics ==

Natural order 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). Individualism and laissez-faire 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. Private property 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. Diminishing returns 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. Investment capital 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." ==See also==