Members of Physiocratic School

List of two important members of Physiocratic school:- 1. Francois Quesnay 2. Anne Rober Jacques Turgot.

Member # 1. Francois Quesnay (1694-1774):

Life and Works:

Quesnay was born in 1694. He was the first in the chronological order. He belonged to a poor peasant family. After studying medicine, he established himself as a village physician and wrote several treatises and books on medical subjects and philosophical problems. He was a physician to Louis XV. He was an ardent lover of village economy and he could never reconcile himself to urban civilization.

Agriculture was the vocation of his heart and he was always in mental contact with the village. He was so much impressed by the conditions of the peasantry in those days that he started writing on economic problems. At first, he started writing papers and articles anonymously or under a pseudonym in various periodicals. His first economic essays, “Firmiers” and “Grains”, were published in the famous encyclopedia.

Quesnay is best known for his Tableau Economique, He laid emphasis on agriculture, demanding that it should be brought to the highest level of perfection. “Poor peasant: poor kingdom: poor king” is the maxim generally attributed to him.

He was in favour of granting freedom of trade and industry so that agriculture could get enough chance to expand. The main theme of his table is the annual distribution and circulation of the output of agriculture and manufactures which have been represented by a diagram.

Economic Ideas:

Quesnay’s ideas, which are contained in his articles, essays, dialogue and the table can be classified as critical and positive. In the first category come those ideas which are critical of Mercantilist doctrines and policies. In this respect he was influenced by Boisguillebert. But the main difference between the two was that while the bulk of Boisguillebert’s writings were directed against the financial policies of Louis XIV, Quesnay besides decrying the existing economic and social conditions desired to establish an order naturel, based on the laws of nature.

Quesnay was a devout catholic and a rustic by sentiment, who, with his heart in the village looked upon trade and commerce with distrust. The critical aspect of his work is related to the existing conditions of France while the positive aspect is modelled after the medieval conditions.

Quesnay’s social principles have permeated his teachings regarding laws of nature. Man cannot create laws just as he cannot create himself. He is only the bearer of the laws and not the legislator. Natural laws are the permanent laws, which are of two types: physical and moral. In his reasoning regarding physical laws he was influenced by Locke while in his analysis of moral laws he was influenced by St. Aquinas.

1. Riches:

Quesnay held that the earth and its fertility were the only sources of riches and these were increased through cultivation. Riches are the consumable articles which satisfy human needs. It is the need or the utility which transforms things into riches. Agriculture gives two kinds of riches: the annual revenue to the landed proprietors and the returns to the labour and the expenses involved in cultivation.

The revenue of the landed proprietors, i.e., the net product is the sum which remains after deducting the cost of tillage from total yield of the land. The net product and cultivator’s returns are the measure and limit of the annual income of the nation. They are the annual fund from which all expenses, individual and national are met.

The magnitude and the size of this fund depend on the price at which the produce is sold. For the creation of the net product it is necessary that the produce must be sold at just price, ‘bon prix’. It is the price at which the cultivators offer their produce and is determined by taking into account their cost of production as well as the surplus value which soil contributes.

In practices, ‘bon prix’ is ultimately determined by the demand and supply of the commodity. Freedom of trade and unrestricted competition are the essential conditions for the determination of the just price and for furthering the prosperity of agriculture.

2. The Productive Classes:

Since land produces a surplus, Quesnay regarded proprietors and the cultivators as the productive classes. The artisans, craftsmen, professional men, merchants and traffickers were declared unproductive. The productive classes not only meet the cost of production of the commodities but also supply additional riches, which form the revenue of the nation. It is the production of these additional riches that helps us to differentiate between productive and sterile occupations.

3. Equality of Exchanges:

Quesnay looked upon mankind as a single community, whose members exchange superfluous commodities on the basis of justice, value for value without loss or gain to anyone, but to the benefit of each. The same law applies to trade between various nations. He did not uphold the exchanges which are performed through the intermediaries of merchants.

According to him as long as those exchanges take place direct between producers and the consumers, they were right and in conformity with the principles of equality and justice. He was thus not against all sorts of exchanges for he thought that without the operations of the merchants the surplus produce would lose all its value.

In a natural order, i.e., where trade is free, the exchanges are always equal and both countries benefit equally. This type of trade is beneficial to both the countries. But when merchants turn into traffickers, their interests and those of the nation are diametrically opposed.

Undoubtedly, the traffickers bring home large gains, but these are not public gains. Quesnay, thus sums up that,” the most advantageous policy for a State is, therefore, the continual and progressive increase of its agricultural production and thus also of the product net, and utmost restriction of the gains of the traffickers, i.e., that the payments for their services should be as low as possible. The most rational means to achieve this aim is perfect freedom of trade”.

4. On Money:

Quesnay regarded money as a barren metal. It produces nothing and serves only as a measure of value and a pledge. Money, to him, was merely a statutory medium of exchange. He did not agree with those who regarded money as real wealth and claimed that money purchases all the things. His contention was that money as such is not serviceable for immediate use. It is not a consumable article.

The consumable articles arise chiefly from the annual wealth of agriculture, and are distributed through the commerce by the medium of money. Money, thus, is the medium of exchange and distribution of goods, whose quantity depends upon the volume of available goods.

In short, neither money nor commerce, neither merchants nor traffickers bring wealth to the nation; it is annual production of the primary goods which is the source of wealth, which gives rise to commerce and money and which provides employment to traders and merchants.

5. Favorable Balance of Trade:

The idea that favourable balance of trade can bring in riches to the country was intolerable for Quesnay. He said that persons who nourish such ideas forget that every sale is a purchase and that both buyers and sellers mutually exchange goods of equal value.

In conditions of free trade losses and gains would be equal, but in conditions of inequality of exchanges created by custom duties or monopolies or manipulation, balance of payments cannot be equal. Quesnay was against granting privileges and tariff manipulations to boost up manufactures because it leads to the impoverishment of the farmers.

The injury inflicted on agriculture is increased all the more by the manufacture of fancy goods from the imported raw materials. According to him the criterion of prosperity or poverty of a nation cannot be found in the balance of trade. A country may be poor with large exports. A country can be prosperous only when inland production and consumption are equal.

6. Rate of Interest:

Quesnay who was vigorously advocating free competition for determining the just price, was not prepared to grant any liberty to the money-lenders and desired maximum governmental control to fix the rate of interest. According to him the rate of interest must be equal to the revenue earned from the ownership of land which a man would purchase if he does not lend out the money.

The profits of commerce cannot set a standard for the rate of interest because the profits are themselves against the natural order. The revenue from agriculture, being legitimate in itself, should be the maximum standard of the rate of interest. Quesnay, like his predecessors realised that the various methods of obtaining revenue for the government were unjust and uneconomical.

Since land was the source of the national income he proposed to abolish all various impositions to make the net product of agriculture the only and single source of public revenue and tithes. He wanted the proprietors of land to bear the entire burden of taxes. According to Quesnay, “the best form of government was a single authority, vested with sovereign power, but acting in conformity with the laws of nature and the positive law derived from them”. Such were his ideas and he was virtually the father of political economy.

Member # 2. Anne Rober Jacques Turgot (1727-1781):

After Quesnay, Turgot was the most celebrated member of the Physiocratic school. He was born at Paris in 1727. He presented Physiocratic principles in a methodical way and helped in their spread. As Intendant of Limoges he introduced many reforms specially by removing restrictions from commerce. He was later on appointed as the Finance Minister when he established free trade in grain with France, abolished taxes, and suppressed the guilds. He revealed physiocracy in action.

Turgot’s doctrine is to be found primarily in two small tracts, the” Eloge de Gournay” and the” “Reflexions Sur La Formationet Distribution des Richesses”, besides his statements in his official and state documents. The Eloge is rather an extreme statement of laissez faire.

The major portion of the book is covered by this subject. It also contains famous Physiocratic doctrine: that agriculture is the source of all revenues and that all taxes are paid by the proprietor. In Reflexions, one finds the superiority of agriculture at its full glory.

The iron law of wages is one of the consequences of this superiority. The simple labourer is knocked down in his negotiations with the employer who had a wide choice because of competition among workers. Farmer is, however, in a happy position because he receives over and above his subsistence. The land is, therefore, the unique source of all wealth.

The book is divided into 100 small sections and covers subjects like the division of labour, the origin and uses of money, the nature of capital and interest, and the role of agriculture. It is in a sense the restatement of physiocratic doctrines. Turgot has concluded that land revenues are the only proper source for taxes. The remainder largely deals with money and capital. He is of the view that no restrictions should be placed on the rate of interest which should be allowed to be determined solely by the course of trade.

In several important aspects Turgot differed from other writers of the physiocratic school. While agreeing that agriculture could yield a net product he has introduced some elements of a subjective theory of value. Turgot had realised that a time would come when the owner of the land would not be its cultivator and would be transformed into a wage-earner. And in this context since the labourer will be paid only a subsistence wage, the balance of the net product would become ordinary capitalized profits.

Similarly, he held that those who occupied the land first became the proprietors while those who came later became the labourers. This concept seems to be in sharp contrast with that of other writers of the school.

He, therefore, differed with the physiocrats on the following points:

(a) Productivity of agriculture and the sterility of industry,

(b) Landed property being no longer an institution of divine origin. It was a result of occupation and public utility, and

(c) Movable property holds a prominent place in his work. He recognised the worth of capital and proved the validity of interest.

Turgot was, no doubt, one of the most illustrious members of the school but he can be distinguished from other physiocrats. His book “Reflexions” appears to be a tiling of great controversy. Cossa declared that the book was the first scientific treatise on social economics. Ingram liked it immensely and held that it must occupy a place among the classics of the science of economics.

Turgot had a remarkable style of writing, but whatever he wrote, was taken mostly from others. He drew inspiration from Cantillon, Hume, Gournay, and Quesnay. Cantillon’s Essay was more scientific while Turgot’s was more voluminous. But Cantillon, Turgot and Adam Smith—all are landmarks in the development of economic science.