TEMA 10: LA FISIOCRACIA Prof. Dr.

Eduardo Escartín González

HISTORY OF ECONOMIC THOUGHTS

TOPIC 10
PHYSIOCRACY
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

1.- SOCIOCULTURAL ENVIRONMENT.

Antoine Barnave (1761-1793), lawyer and French politician, was a member of the Estates General
from 1789 to the start of the French Revolution; although opposed the prerogatives of the king,
ended up defending a constitutional monarchy and for this he entered into hidden negotiations with
the royal family so the Convention sentenced him to death. In his Introduction to the French
Revolution, written in 1792, explains that this revolution was the culmination of a European
revolutionary process motivated by the enrichment of the bourgeoisie due to transoceanic trade
and the consequent development of the production. The middle and petty bourgeoisie launched to
the conquest of political power, until then monopolized by the aristocracy and settled in the
possession of the land, to satisfy his longing for economic equality and freedom. England, which
already had established sovereignty of Parliament, escaped a social revolution, in this epoch. This
was due to a favorable circumstance to consolidate the parliamentary regime to death without
offspring of Queen Anne Stuart, who had succeeded William III. By the Act of Establishment In 1714,
the dynasty of Hanover with George I (elector of that principality) who practiced absenteeism when
feeling more concern for their German State, for not knowing English and living little in England. In
the English parliamentary system the first Minister Walpole consolidated, to the detriment of that
of the Lords, the dominance of the House of Commons favored some of its members by corruption
and he relied on them to carry out the government projects. This policy was followed during the
reigns of George II and George III, by some of prime ministers, like Pitt the Elder and, very especially,
by his son Pitt the Younger, with whom he definitively consolidated the parliamentary monarchy. In
Mediterranean and Eastern European countries revolution was not reached because those
countries were economically underdeveloped and therefore its bourgeoisie was of little entity. The
revolution nor did it spread to the Netherlands because its economic, social and political condition
resembled the English. It was in France that the revolution broke out, already have this country with
a large middle class component and petty bourgeois (oppressed, like the peasants, by an excessive
burden of taxes ). When the bourgeoisie allied itself with the peasantry (because they were both
social groups the effective supporters of financing of the State) and with the working class
proletariat (exploiting with endless working hours and with miserable salaries) The right conditions
were given to attempt the conquest of political power. In the French pre-revolutionary
environment, mid-eighteenth century, physiocracy emerged with a marked innovative character
economically, but politically conservative, and imbued with the spirit of century of lights, of the
illustration. Since the beginning of this century, the development economic, encouraged by
advances in science, was favored by the introduction of new techniques more rational agricultural
(drainage and conditioning of the terrain, deeper plowing, rotation of crops, mechanical planting,
etc.), of new crops (corn, potatoes, etc.) and inventions in the industry (flying shuttle, spinning
machines, etc.). The intelligentsia, starting from a transformation of the natural law concept by
substituting the metaphysical system of knowledge by a system rational, was generally opposed to
any source of knowledge and all irrational political practices based on deism, revelation, the
supernatural, or tradition. He understood that with reason one could dominate nature and use it
for the benefit of the Humanity, to endow it with a happier existence and pleasant as a natural fact.
The great faith in human perfectibility and progress propelled the intellectuals to propagate their
ideas to free the men of ignorance and oppression, enlightening them through the lights of reason

1. The reason for the uprising of the English colonies in North America was also due to the
raising of taxes in 1765 and 1777 and the granting of monopolistic privileges to the Compañía
de the East Indies in trade with America.
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

Locke's thought and the evolution of English political system represented on the continent the
closest antecedents that inspired the ideal of achieve a political regime endowed with legitimacy
democracy to replace absolute monarchy legitimized by the irrational grace of God.
The foundations of a new political regime, to a monarchical state with separation of powers, are
described in Of the Spirit of the Laws (1748) of Montesquieu. The theoretical constitution of a state
democratic, in which popular sovereignty is delegated to a government elected by the people,
would soon be published by Rousseau: The Social Contract (1762). Finally, the spirit of the
illustration was put into practice under the direction of Diderot with the edition of the Encyclopedia,
or Reasoned Dictionary of sciences, arts and crafts (in 17 volumes of text, published between 1751
and 1765, plus 11 volumes of engravings, dated the last in 1771). To post the Encyclopedia counted
with the collaboration of philosophers French and the support of Madame de Pompadour, Los
articles of economic content were written by the Physiocrats, including Quesnay and Turgot.

2.- THE PHYSIOCRATIC SCHOOL

It is made up of a heterogeneous set of economist philosophers who, from the decade of the fifties
of the eighteenth century, faithfully followed the economic thought of an eminent author: Quesnay.
The Physiocrats formed a compact group in around the defense of a central idea (or nucleus of its
economic theories) and a political program. The central idea was the transformation of the French
economy giving primacy to the agricultural exploitation in freedom regime.
Les économistes (as they called themselves themselves) of physiocracy understood that through the
rationalization of agricultural techniques could be achieve a modern and efficient agriculture, with
a abundant production, on which the entire economic system. The political program was to maintain
the ancien régime basing it on a renewed concept of the natural order, more in line with the
rationalism of that century. your proposals of economic reform, in many orders, could only be
carried out under the impulse and direction of a strong government, that is, by a despotism
enlightened, exercised by an absolute monarchy. Quesnay, personal physician to King Louis XV,
published the Tableau Économique in 1758, accompanied of a supplement Maximes Générales du
Gouvernement Economique d'un Royale Agricole. was the teacher undisputed of Physiocracy,
because with its power of conviction managed to attract to his cause some economists who, by
propagating their ideas, were gaining adepts. The members of the group, still maintaining their
independence of judgment in some respects, supported and praised each other, to such an extent
that, Ironically, Turgot called the group "the sect."
newspapers. Baudeau and Dupont were effective "reporters" who knew how to make good use of
the capacity press propaganda. They published numerous articles in the Journal Oeconomique
(1751-1772). Dupont edited the Journal d'agriculture, du commerce et des finances. Baudeau
founded in 1765 the weekly Éphémérides du citoyen (directed by Dupont from 1768) that became
the organ of expression of the Physiocrats from 1767 to 1772, when it was banned for his opposition
to the government. When Turgot went Appointed minister in 1774, he granted license to reopening,
for which the publication was shown favorable to Turgot's policy, while attacking his opponents.
The scientific nature of his theories, the leadership of a charismatic personality, awareness to form
a united group for the development of a "research programme" and the existence of a means
expression and dissemination of their ideas are the characteristics for which it is currently
considered Physiocracy one of the first scientific schools of the economic thought (after the School
of Salamanca).

However, the great difference in the economic-political conditions of other countries and the
unstoppable transformation of both structures economic (incipient industrial revolution) and social
structures (bourgeois revolution in full boom) made physiocracy an ephemeral movement both in
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

its geographical location (reduced to France, with some slight influence in Germany) as in his
temporal extension (approximately a quarter of century, between 1755 and 1780) before the French
revolution; it erased all vestiges of physiocracy due to its elitist and aristocratic political
connotations2

The main representatives of the physiocracy, discounting Quesnay and Turgot who will study
separately in greater depth, are: Jean-Claude Marie Vincent de Gournay (1712 - 1759), wealthy
businessman and lord of Gournay for the purchase of the lands that conferred the title. He spread
the work of Cantillon and was the private teacher of Turgot in economic matters. He advocated
freedom economy and the removal of regulations and the monopolies. He is credited with the
famous phrase Laissez faire (Laissez faire, laissez passer, le monde va by lui même3 ). He did not
write any specific work on economic issues, although various articles. Victor Riqueti, Marquis de
Mirabeau (1715 - 1789). Participated in the Wars of the Polish Succession (1733 - 1735) and from
Austria (1740 - 1748). then it worried about exploiting its properties by introducing modern
agricultural techniques. under the influence of Cantillon wrote The Friend of Men, or Treatise on
the population (1756) where he denounces the extremely poor state of French agriculture. After
meeting Quesnay, and being convinced by he devoted himself entirely to the Physiocrat cause, so
that his following writings already enter fully into the dissemination of the theories of physiocracy.
under this new perspective published the last parts of The friend of Man (1758 and 1760), Tax
Theory (1760) and Country Philosophy (1763). Since its foundation in 1765, Until 1768, he
collaborated with Baudeau in directing the Ephémérides du citoyen newspaper. Pierre-Paul Mercier
de la Riviere (1720- 1793), held the position of Counselor of the Parliament of Paris (1747-58) and
that of Intendant of Martinique (1759-64). In 1767 he was professor of economic philosophy of
Empress Catherine II of Russia. His main work is The natural and essential order of societies policies
(1767), where he proclaimed himself a supporter of legal despotism of the monarchy as a form of
government (a book with a similar content and something more excerpted it was published by
Dupont de Nemonos under the title: Of the origin and progress of a new science (1768)). He also
wrote The Freedom of Trade grains (1779) and collaborated on the Journal of agriculture, trade and
finance. Nicolas Baudeau (1730-1792) was a French priest who initially opposed theories
physiocrats, but ended up being one of their main champions and effective promoter of the cause.
founded the weekly Éphémérides du citoyen and wrote First introduction to economic philosophy
(1771). you will credits the invention of the term 'physiocracy'. Pierre Samuel Dupont deNemours
(1739- 1817), was another of the great figures of physiocracy won for the cause by Quesnay. Wrote
profusely in the Journal d'agriculture and in Éphémérides du citoyen, newspapers that he directed.
He published Quesnay's Memoirs, which were edited again in two volumes under the title
Physiocracy or natural constitution of the government most advantageous to the mankind (1767).
He obtained important positions of economist with Turgot and Vergennes (the last great minister
of the Old Regime). He was accused of counterrevolutionary and imprisoned at the beginning of the
French Revolution; released and again declared an outlaw, he took refuge in the United States with
their children. One of them, Éleuthére Irénée, started, with the foundation in 1802 of a gunpowder
factory, which would end up being the great chemical emporium of society American "DuPont de
Nemours". Other works of Dupont are: Reasoned compendium of the principles of political economy
(1774), Memoirs on the life and the works of Turgot (1782) and Of the legislative power and of the
executive power that suit the republic (1795).

2 Poner la ciencia al servicio de la política es una práctica muy frecuente y, a menudo, causa del
desprestigio de las teorías.
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

3 "Dejad hacer, dejad pasar, el mundo va por sí mismo". Según Eugéne Daire la frase se debe a
un comerciante llamado Legendre, al que consultó el ministro Colber

3- THE GENERAL CONCEPTS OF THE PHYSIOCRACY

The natural order. This is the basic principle of the school physiocrat. Nature, governed by natural
law, is the that should govern all human institutions. The name of physiocracy, extracted from the
Greek, has precisely this meaning: physis = nature and cracy = government.

Nature reveals her own laws man and he can deduce them through reason. Thus, from the perfectly
ordered cosmos is derived "the essential order of human societies. This order essence of societies
consists in "a harmony perfect of social institutions without which the happiness and growth of
mankind could no occur".

The natural order is an ideal that has to reach the human to achieve prosperity economy, wealth.
Law follows from it. natural5 , set of physical laws that "regulate the physical events of the natural
order evidently most advantageous for mankind" (Quesnay, Ch. V of Drioit Naturel). However, men
manifest in their institutions a positive order that if separated from the natural is due to the inability
of legislators to correctly interpret natural law; when this occurs the beneficial effects cannot be
achieved of the natural orde

The exclusive wealth and productivity of agriculture: net product.

Quesnay categorically rejected the

4 Según se expresa Mercier de la Rivière, en El orden natural y esencial... (1767).

5 Droit naturel (1765), artículo de Quesnay publicado en Le journal de l'agriculture...

identification of money with wealth: "money itself itself is absolutely sterile", it only produces rent
to through a good that produces it (Quesnay, 2nd Note to the Maximum XIII). For Quesnay (Máxima
III) riches were renewable products from agriculture and that served to subsist, to what he called
luxe of subsistence, and to enjoy, what he called luxe of decoration. Mercier de la Riviere, following
what was said by Quesnay in the 2nd Note to Maxim XIII, stated that wealth "is a mass of goods that
can be consume without impoverishment, without alteration of the principle that constantly
reproduces it" (James, 1959, p. 66). Quesnay, in search of activities productive that are capable of
providing perpetually consumable goods, without detriment to the source of its production, finds
only one branch of the output that supplies a net product, that is, an amount of goods greater than
those used as raw material, as replacement of productive capital and as payment of employees
(generally as costs of production): agriculture. The agricultural surplus over the costs of production
is a gift that freely springs from nature; this originates the physical creation of goods whose net
product (or surplus) is the base that sustains All society. "The earth is the only source of riches and
agriculture multiplies them", according to Quesnay (Maximum III). All other branches of production
are "sterile", since they do not enjoy any of the characteristics of agriculture: do not physically create
surplus goods, nor is their productivity a gift free (not linked to a cost) nor do they support the entire
economic activity of the society. these remaining economic activities the only thing they do is move
place, combine or transform something already existing with anteriority. According to Quesnay (in
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

his article Sur les trabaux des artisans) “the works of craftsmen are not wealth but by the gathering
of other riches already existing”. Furthermore, according to Galbraith (1987,

Although the concept of net product, or exclusive productivity of agriculture, is actually an

indeterminate principle, since neither the Physiocrats it was not precisely defined by scholars of his
works have succeeded in clarifying what they intended to imply with him, the truly interesting thing
is to contemplate a national economic system continuously supplied with raw materials provided
by nature (Schumpeter, 1954, p. 282); that is, the promotion of exploitation of the country's natural
resources for boost its economic growth. Foreign trade and bon prix. Commerce in general, like all
branches of economic activity (except agriculture), is "sterile" in the physiocratic sense of not
creating a net product. The characterization of "sterile" does not meant, for the Physiocrats, that
the activity was useless or unimportant. For them all economic activity was relevant. The exception
of this rule was international trade. base wealth of the nation in a trade balance surplus that would
result in an accumulation of gold and silver (as advocated by mercantilist theories) was an "idea
chimeric" (according to Spiegel, p. 225). There were several reasons why the Physiocrats did not
have too much confidence in the national gains through foreign trade (see Spiegel. 225): 1º.- Gold
and silver, it has already been mentioned, do not it constituted for them the wealth of the nation;
this one managed to develop agriculture with techniques modern and circulating the net product
throughout the national economic sectors, which promoted, in turn, production and domestic trade.
All of it is which generates national wealth.2º.- Trade is nothing more than a barter, an exchange of
goods. Any act of sale implies an act of purchase; so it's crazy think that you can always sell without
buying anythingchange, or buy less than what is sold. The sale in foreign trade of surplus of the
products of the land is a means to achieve a bon prix (good price, that is, high) in the interior, since
excess supply would not put pressure on prices down. Regarding imports, it is the last resort to
dispose of the necessary goods that could not be produced in the country in the amount enough.
3º.- Obtaining profits at the expense of others countries could only lead to retaliation and even the
wars. In these the profits are largely lost acquired through international trade. All these ideas about
foreign trade and its replacement by a national production system fit perfectly into the French
mentality (at least in the halls of Versailles). When the physiocrats began to write, the country was
at war and had suffered serious reverses both at sea and in the colonies. Furthermore, the French
had not forgotten the economic disasters caused by the wars of the last years of the reign of the
Sun King (at the end of the 17th and early 18th centuries) or the wars during the reign of Louis XV:
Polish Succession, Succession of Austria and especially the contemporary Seven Years' War (1756 -
1763): Without prior declaration of war, in 1755, England seized more than three hundred French
merchant ships. After the own vicissitudes of war and successive defeats inflicted by the English at
sea and in the colonies French, for the peace of Paris (1763), France lost practically its first colonial
empire: its possessions in India, their rights west of the Mississippi, Canada and several Antilles in
favor of England and Louisiana in favor of Spain in compensation for the loss by the latter of the
Florida.

generation of physiocracy, were quite disappointed with the colonial enterprises (in which Law also
contributed his grain of sand) and that they think that the gains from transoceanic trade would end
being prey to the English fleet (Schumpeter, 1954, p. 280n). private property.

Private property is the most important

social institution that, furthermore, is in accordance with the Physiocratic concept of the natural
order in a triple aspect (according to Spiegel, p. 227): The natural right of all men by all things is
absolutely unfeasible. According to Quesnay's analogy, the right of all swallows by all insects it is
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

only possible to exercise itabout the insects that each bird is capable of capturing. Similarly, each
man has only the right natural over all things obtained with its own worked. This theory comes from
Locke, but Quesnay expands with the reciprocal, since personal work, useful both for himself and
for society, he is justifiedin the legal guarantee that its fruits revert to the private benefit of each
individual. Natural law also grants each individual the power to use at his will the physical and
intellectual faculties, as well as having free of its properties. For the Physiocrats there a direct
relationship between the amount of the property and the degree of freedom a man can enjoy. And
finally, the logical consequence of the two previous aspects leads inevitably to that natural law must
be translated into positive law that safeguards territorial property, although the earth is not a
creation of human labor. This logic is based on the fact that the acquisition of the property privacy
excludes possession by others and does not an exception can be made with the property territorial.
In addition, this property guarantees generation after generation, the interest in improving the
productive state of the land in a process cumulative and that it is only possible to do it.

of the Physiocrats from the premises (for them evident) extracted from the natural order, is that
the private property, exercised freely, and equality social are necessarily incompatible. The system
conceived by them required inequality society to circulate the net product and thus create the
wealth and well-being of society. This conception of the flow of income we can designate it as the
communicating vessels theory (or of the potential difference) because in the same way that water
only circulates between two connected containers when there is a difference in level between them
(or the electricity between two points joined by a conductor when there is a voltage difference
between them) economy of a society requires a difference in the economic level of its members to
circulate the income and wealth originates; but at the same time his own economic system must
cause inequalities constantly for indefinite maintenance. The accumulation of wealth caused by
property Private is the generator that allows the maintenance of the differences of level or potential,
that is, of the growing social inequality.

Laissez faire or economic liberalism. The positive order has to be in concordance with the natural
order to produce the beneficial effects on society. However, the pre-existing reality, through of its
configuration in positive law, it was a accumulation of regulations, regulations of privileges for
monopolies, production controls, restrictions customs to internal traffic, prerogatives, rights and
feudal benefits, and many others that discouraged all productive effort. The economic reforms
advocated by the Physiocrats demanded the abolition of all regulations inherited from the past and
that constrained the system economic. Therefore, rather than regulate something against the
natural order, whose laws were the most advantageous to humanity, it was preferable to do
nothing, let the world of the economy marched by itself: Laissez faire, laissez passer, le monde va
de lui même. champions of economic liberalism, free trade and non-intervention of the government
in the affairs of theeconomy. Also, of economic individualism, since believed that the harmony of
the natural order translated into the harmony of individual interests and those of the society7 ; as
well as in harmony between classes despite their inequalities, since, aspreviously exposed, these
were derived from the very natural order and were necessary for the system to cheap would work
fine. Quesnay (Droit natural,Chap. IV) anticipated the guiding principle of the metaphor of Adam
Smith's invisible hand when he wrote: "No everyone contributes equally but the activity of one
counteracts the other. So everyone can fully perform what corresponds to it; and under this
reciprocal supplement, all contribute more or least equated to the benefit of society. However, the
economic liberalism of the Physiocrats was focused on getting a good price (bon prix) for agricultural
products as a guarantee of a high net product and a high consumption of landowners (earners of
land rents that originates said net product). About this bon prix thing, it's that is to say, of the
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

agricultural products expensive in origin, Quesnay (Maximum XVIII) says: "abundance without value
it is not wealth; hunger and scarcity is misery; abundance and scarcity is opulence”. The high income
of landowners were the ones who started up all the economic system in two aspects: on the one
hand, provided the advances (or “advances”, Maxim VI) capital needed to start operations
agricultural and on the other hand its consumption was the base of the prosperity of the rest of the
members of the social body. Regarding consumption, the observation made by Quesnay is very
interesting for his Keynesianism: "everything the world has to spend its income immediately in
consumer goods", because if someone decides save "to increase your individual reserves of money"
the entire national economy will suffer, since that every act of saving deprives someone of an
income (cited by Schumpeter, 1954, pp.279 and 335). Here we have an early version of the paradox
of austerity: at the individual level (microeconomic level) people get rich when they save, that is, if
they are austere (not incurring superfluous expenses). Without However, at the general level of
society (plane macroeconomic), in the short term, the sum of the savings individuals, which are not
channeled towards investment, cause an insufficiency of aggregate spending that causes a decrease
in national income and, therefore, Therefore, lower income and impoverishment general.
Therefore, to achieve enrichment of the nation, in the short term, it is not advisable to save
individual (austerity), but, on the contrary, the increased spending (prodigality), although
apparently individuals are impoverished. Physiocratic laissez faire was therefore very relative; to put
his liberalism into practice needed active government intervention(Schumpeter, 1954, p. 274) that
would remove all the obstacles that hinder the attainment of high agricultural prices and to promote
conditions adequate to make them possible. Among other measures proposed a legal ceiling on
interest rates and restrict the export of manufactures to avoid thus entering into international
competitiveness, which would lead to low wage costs, and to reduction in the cost of living (that is,
in the price of livelihoods from agricultural production). All this implied deep reforms administrative
and institutional. That is why they advocated enlightened despotism8 as a form of government
carry out, from above, the modernization and rationalization of the economy, and as a social form
to keep the aristocratic in her class position elitist (which in his theory had been elevated to the
engine of the economic process).

The single tax.

The complex structure of the tax system
The French also demanded a rationalization and, on The solution of the Physiocrats was to tax with
a direct tax the net product. This was the only income that could support the tax for not be linked
to no production cost. All the other taxes, in any branch of activity economically, they would be
transferred via costs to thenet product (Schumpeter, 1954, p. 274-275). This theory is similar to
Locke's (see thisregarding his treatment of ground rent in the Topic 8), since this author had already
mentioned thatany tax is ultimately passed on on net income from agriculture. Taxes are getting
more expensive in the chain of repercussions, due to management expenses and control, for which
reason it would be much more effective and cheap a single and direct tax on the product net. In this
regard Quesnay (Maximum V) says: "That the tax […] is established on the net product of real estate
and not on the wages of men or on groceries, because they multiply the expenses of perception".
The simplicity of this idea of Quesnay's (and almost unfeasible in practice, precisely because of its
extreme simplicity) was supplemented by Mirabeau in his Theorie de L'impôt (1760), through other
taxes, fees or income from the production of salt and tobacco, coinage, postal service and the
income from the seigneurial domains of the crown (Schumpeter, 1954, p. 275).
From 1746 to 1748 he was secretary of the Academy of
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

Surgery; in 1751 he entered the Academy of Sciences. He was physician to King Louis XV and also to
the Marquise de Pompadour (lover and favorite of the king). in 1755 He bought some land where
he carried out experiences agronomic. For the Encyclopedia he wrote several articles: Farmers
(Fermiers, 1756), Cereals (Grains, 1757), Men (Hommes, 1757), and Taxes (Impôts, 1757) (although
these last two did not reach appear in said work and were not published until 1908). In these articles
he expresses free-trade ideas, anti-mercantilist, non-interventionist and highlights the role
preeminent role of agriculture in the economic system.In the Journal de L'agriculture, du commerce
et desfinances published the articles “Natural Law” (Droit naturel, 1765) and "On Commerce" (Du
Commerce, 1766). In Éphémérides du citoyen appeared "Despotism of China" (1767) and "Analysis
of the Governmentof the Incas in Peru» (1767) that exposes it as practical example of his theories.
Quesnay's masterpiece was the Tableau économique (1758) or economic picture where in a simple
graph exposes his theory of the circular flow of income, referring to a global economic system in
Balance. This painting was accompanied by a memoir, or political and economic commentary,
entitled General maxims for the economic government of a agricultural kingdom. Quesnay, who can
be considered as a forerunner of utilitarianism, adopted as a principle of economic reasoning the
rule of achieving "the maximum satisfaction with the least work effort"(cited by Schumpeter, 1954,
p. 277). Apart from his economic importance, since it comes to focus the economics issues in
problem solving of optimization, that is to say of maximums and minimums, applied this rule in the
exposition of his theory. at least like this was for his readers: on a single sheet of paper, with a
sketch, he was able to summarize a whole theory about the conception of a global economic system
in Balance. In this system, all elements of thenational economy are related to each otherthrough a
circular flow of goods that, going from element by element, it reproduces indefinitely. Quesnay on
a sheet managed to graphically synthesize a compendium of economic theory. Your painting is so
expressive that it seems to speak for itself. According to Adam Smith (1776, p. 605-606), the Marquis
de Mirabeau considered of great importance the invention of the picture and he compared it with
that of writing and that of currency9

The general interdependence of all elements of the economy had already been observed by other
previous authors; but they had considered as an obvious relationship and without realizing that the
The principle of interdependence is basic to the economic system. This is the reason why those
authors did not feel any concern to investigate its implications. Cantillon and Quesnay did realize
essential that interdependence is for the system and therefore base their theory on this principle
(Schumpeter, 1954, p.286). Adam Smith, who was associated with the Physiocrats, during his stay
in France for almost three years (between 1764 and 1766), who knew the Tableau, because
according to Blaug (1978, p. 53) was "mentioned but not explained by A. Smith”, and that in his work
some inspiration in the theories of physiocracy, did not know understand the scientific importance
of the painting for the economy. He did notice the primacy that the French granted to agriculture,
but considered that this was leaf litter and that the insistence was outdated physiocrat in the
exclusive productivity of agriculture in a world that began the industrial revolution. Some aspects of
physiocracy became the subject of its criticisms, as well as mercantilism. The development of
economic theory by the classical school, following the principles of Adam Smith after its success, it
explains the oblivion for more than a hundred years of the circular flow of income theory. would be
another French, the marginalist Leon Walras, who sensed thepossibility of analyzing this
interdependence: Through a system of equations, one could determine all the prices and all
quantities of goods and services

of an economic system in general equilibrium. Quesnay, inspired by Cantillón, integrates members

of society into three social classes (or economic sectors) according to their function in the economy:
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

The productive class is formed by the agricultural entrepreneurs and wage-earning peasants. The
The naming of this class is based on the idea of the exclusive productivity of the land; is the only
class capable of achieving a “net product” (“net product”). The mixed class is the one formed by the
landowners, by the owners of the lands that they cede to agricultural entrepreneurs in exchange for
rent. The competition between these entrepreneurs for the leases enable landowners to extraction
in its favor of all the net product of the farming. This class is called mixed because, even without
being directly productive, it is the one that provides the lands, she who supplies the advances (or
capital advances)10 required for the beginning of the agricultural exploitations and the one that
with the expenditure of income guide the direction of production and keep the net product in
circulation. Not having to work, members of this class are "available" because of what people are
suitable for engaging in public affairs, policy, and also to sustain public spending through the single
tax on its net product. The sterile class is the one formed by all the other members of the company
not included in the two previous classes; in it is found, therefore, the industrial entrepreneurs,
liberal professionals, artisans, merchants, wage laborers, and the other members of the company
not included in the two previous classes. The name sterile means that the industry of this kind does
not produce a net product;

The competition between the workers of each trade or profession to get a job, with the that earning
a living, allows you to maintain wages in the subsistence minimum. The same happens with the
peasants, but with the substantial difference that these in addition to producing their salary, thanks
to the bounty of nature11 also produce a surplus with which the whole society is maintained. Three
other implicit hypotheses, in addition to the former division of society into classes, there is in the
tableau. Quesnay first assumed that for produce an annual income of 2,000 million francs an annual
advance (capital advance) of another two billion. That is, the income of the class productive
investment in agriculture provided a quantity of product valued at double the investment made; of
that production, half was net product. The barren class with its expenses only reproduced the same
value, since when producing generated net product. Second, he assumed that each social class
spends its income in halves, one of them in the purchase of agricultural products and the other half
in acquiring manufactured products and services, provided or marketed by the sterile class. Y Third,
he assumed that in all social classes proceeds are fully spent. Quesnay was the first economist to
make simultaneously a dynamic study of the economy (in the modern sense of analysis by periods)
and a mathematical reasoning for the quantification of a mass of goods per unit of time. The result
of that quantization is the limit of the sum of the terms of a geometric progression (to which they
were so fond the Arabs) of ratio less than unity. Besides implicit in this reasoning is the principle of
the multiplier (175 years would still have to pass to be discovered), according to which an increase
autonomous spending (whether in consumption or investment)generates an income in the person
who receives it, of which a fraction is consumed, in turn, creating new income to other subjects,
part of which is also consume, originating, in this way, a chain of less and less income and expenses,
so the sum of the incomes has a limit, so that the total income caused in the global framework of
the entire partnership is a multiple of the increase in initial spending. The representation of the
Tableau Economique is exhibited in Figure 1. This exhibit is a version didactics of the one carried out
by Quesnay. Follow all your basic lines, including its peculiar representation in zig Zag. Practically
the only change is the addition of the expenses that the productive class and the sterile performed
within their own class12. In a previous period (t-1) the productive class with annual advances of
2,000 million francs obtain a production valued at 4,000 million, of which 2,000 million is the net
product that delivered at the beginning of the following period (t) to the class mixed as rent for the
lease of the land. In the current period (t) landowners spend your rent; half in the purchase of
agricultural products and the other half in manufacturing and services. These expenses they initiate
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

the productive process of the economic system. The productive class with these incomes of a
thousand million, invested in the crops through the purchase of agricultural products (within its own
sector) by value of 500 million and manufacturing and services (in the industrial sector) valued at
another 500 million, obtains a production valued at 2,000 million. From they retain 1,000 million,
amount of the net product, to pay the rent of the land at the beginning of the period next (t + 1).
The barren class with the income of 1,000 million from the initial purchase made by the mixed class,
after investing them, obtains a production valued at 1,000 million (since this sector economy does
not obtain net product). To perform this production, the billion entered are spent buying raw
materials and supplies in the sector agriculture, valued at 500 million, and manufactures and
services within their own economic sector, for value of another 500 million. The productive class
with these 500 million from the barren class, again inverted, produces worth 1,000 million, of which
withholds 500 for the future rent payment, having spent 250 million in purchases within its sector
and another 250 million in the acquisition of manufactures and services in the industrial sector, that
of the sterile class. The barren class with the entrance of the first 500 million from the productive
class, once invested, produces products and services worth another 500 million through acquisitions
in the sector agrarian worth 250 million and in the sector itself worth 250 million. The productive
class and the sterile class continue successively making purchases from each other in a chain of
purchases, sales, income, investment, production, retention of the amount of the net product for
payment of rent, sales, purchases etc. Nevertheless, each new round of purchases is half that of the
previous one, reason why the process ends up being extinguished, because it goes damping in the
form of a geometric progression of ratio less than unity. Thus, during the current period (t) the
collection of the net product and the income of both the productive class and those of the sterile
class are equal: 1,000 + 500 + 250 + 125 + ...= 1,000:(1 - 1/2) = 2,000 million francs. The expenses of
both classes (the productive and the sterile) sometimes within their own sector, sometimes in the
other, they are the same and respectively:500 + 250 + 125 + ... = 500: (1 - 1/2) = 1 billion of francs;
Consequently, the total expenses of each one of these classes (adding those made in its own class
and the other) are 2,000 million francs.

The production of the productive class, with some expenses of 2,000 million francs (half in its own
class and the other in the barren class), amounts to 4,000 million, of which half is the product net.
The barren class only produces 2,000 worth million, an amount equal to your expenses and income.
The collection of the amount of the net product is paid as rent at the beginning of the period next
(t + 1), which continues the process productive under exactly the same conditions as in the previous
period. Therefore, the economic system is not only in equilibrium but it is stationary (it always plays
the same, but this does not prevent the analysis is dynamic). This Tableau Économique actually
onlyexposes the circular flow of expenses. In another version, entitled Analysis of the mathematical
formula of the Tableau, Quesnay presented the final results of a whole period through a double
circular flow, the monetary and that of actual production. This new version is reflected in Figure 2,
where it appears, in the column corresponding to each class, the balance of the situation in which
each one is them after making a transaction. Initially it is assumed that the productive class has, for
the production of the previous period, 3,000 million francs in food, 2,000 million in agricultural raw
materials and 2,000 million in money. The sterile class only has 2,000 million francs in manufactures
produced in the period previous. The economic process of the present period is begins with the
payment of the rent of 2,000 million to the mixed class. The landowners spend it, during the period,
by halves in the purchase of food and manufactures. After this round of spending, the landowners
have disposed of food valued at 1,000 million francs and manufactures by value of another billion.
Farmers now have his power, 2,000 million francs in food, other so many in raw materials and 1,000
million in money. Industrialists own 1,000 million in manufacturing and a billion in money.
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

The barren class spends the money they have (1,000 million) in food purchases. in the new partial
balance the farmers have 1,000 million in food, 2,000 million in raw materials and 2,000 millions in
money; industrialists have had 1,000 million in food and still have 1,000 million manufactured
products. The productive class spends part of the money has, 1,000 million in the purchase of
manufactures. The balance is as follows: farmers have 1,000 million in food, 2,000 million in raw
materials, they obtain 1,000 million in manufactures and, for having spent part of his numeraire, he
has 1,000 million left in money; industrialists are consuming 1,000 million food and just entered
1,000 millions in money. The barren class spends this money on the purchase of raw materials of
agricultural origin. With this the balance The result is that farmers have 1,000 million in food, they
have 1,000 million in materials premiums for their own consumption, have manufactures for an
amount of 1,000 million and, again, of the entire money stock of the country. The industrialists have
consumed 1,000 million in food and they have 1,000 million in raw materials to face the production
of the following period, valued at 2,000 million, equivalent to the cost of survival (food) and that of
the raw materials used. The productive class at the same time is selling within its economic sector
the billion it had in food and many others in raw materials, so that the balance of these transactions,
being internal to the sector is not altered. With the cost of food (1,000 million), of raw materials
(1,000 million) and manufacturing (1,000 million) faces this production sector for the following year;
this new production is the same as the previous year: 3,000 million in food and 2,000 million in raw
materials. It also has the 2,000 million in money to pay the rent at the beginning of the next period.
This analysis differs from the first Tableau economy; but it is still a dynamic analysis by periods with
a stationary equilibrium. a novelty

Apart from reflecting the double circular flow of income, it is that in this variant you can appreciate
the speed of circulation of money, since you can see how it goes from sector by sector, so that with
a monetary fund of 2,000 million francs are transacted worth 9,000 million. Another novelty is that
this version (and not the above) modern sectoral analysis can be applied of the Input-Output tables
of Leontief13, as check in Figure 3. The rows reflect the expenses made by each class in purchases
from all the others; so that the income of each class received from the others are recorded in the
columns. Thus, considering the first row, the class of farmers (or productive) spends on purchases
within from its own sector 2,000 million francs; deliver to the landowners (or mixed class) 2,000 as
rent for the rental of the estates; and finally pay 1,000 million to industrialists and merchants (or
class sterile) for purchases of products acquired from the components of this class. class income
production are listed in the first column, in which observes that within the sector itself 2,000 million
for the purchases that between the members they are made from the same sector; also enter 1,000
millions for selling food to landowners; Y another 2,000 million from the sterile class by the sale of
food and raw materials. Of the same luck contemplate the remaining rows and columns (in respect
of which it is believed that there is no longer a need for a special comment on its content, as each
one of them a faithful summary of the second version of Quesnay, that of the Analysis of the
mathematical formula of Tableau, whose figures, expenses and purchases appear in the didactic
exhibition of Figure 2). Quesnay intuited that the economic system could be out of balance; its cause
would be a bad one orientation of income flows. In this regard exposed situations in which if the
mixed class reduced consumption of agricultural products, spending more on manufactures, the net
product of the productive class would be minor and thus cause general damage for the whole
society by reducing the total amount of National rent. Another similar case would happen when
save, since by withdrawing money from circulation would not reach the farmers and their net
product in full would decrease. Therefore, he recommended that everyone quickly spend your
income.
TEMA 10: LA FISIOCRACIA Prof. Dr. Eduardo Escartín González

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