October, 2017

MDE 622: Development and International Economics

Instructor: Dr. Girma Estiphanos

Some Notes on Physiocracy

Physiocracy is from Greek, meaning “Government of nature.”
The term is a combination of “physio” (nature) and “cracy”
(rule) and, thus meaning “Rule of nature.” About the middle of
the 18th century, a group of French thinkers called physiocrats
evolved a system of economic thought which came to be known
as Physiocracy. They were the believers in Natural Order and
were against the rigid and restrictive practices of the
Mercantilists. Though they were different types of people, like
physicians, philosophers, and statesmen with different views,
they had great unanimity of ideas – human happiness and
prosperity. They believed that government policy should not
interfere with the operation of natural economic laws and
that land is the source of all wealth. They attacked Mercantilism
not only for its mass of economic regulation but also for its
emphasis on manufactures and foreign trade. Whereas
Mercantilists held that each nation must regulate trade and
manufacture to increase its wealth and power, the physiocrats
contended that labor and commerce should be freed from all
restraint. Furthermore, whereas the Mercantilists claimed that
coin and bullion were the essence of wealth, the Physiocrats
asserted that wealth consisted solely of the products of the soil.
Physiocracy was a revolt against Mercantilism in France.
The factors that were responsible for the rise of Physiocracy in
France include; 1) tyranny and extravagant court life, 2)
repressive taxation, 3) decay of Mercantilism, 4) neglect of
agriculture, and 5) Existence of socio – economic inequality.
The movement was particularly dominated by Francois
Quesnay (1694 – 1774), a court physician who studied medicine
and surgery and, later devoted himself principally to economic
studies and Anne – Robert – Jacques Turgot (1727 – 1781), a
French economist and statesman. Physiocracy immediately
preceded the first modern school, classical economics, which
began with the publication of Adam Smith’s Wealth of Nations
in 1776. Thus, Physiocracy is a link between Mercantilism and
the Classical school. One of the integral parts of Physiocracy is
laissez faire (in French) which means “leave it alone” or “let it
be.” The Physiocrats undoubtedly influenced Classical
Economics and especially Adam Smith. In fact, Adam Smith’s
Wealth of Nations in 1776 was dedicated to Francois Quesnay
who died two years earlier in 1774.
Quesnay’s Tableau Economique / Economic Table, which is the
essence of his system of political economy is a diagram that
depicts the process of social reproduction under the “natural
order.” In Quesnay’s economic table, there are three classes: 1)
the productive class – those involved in agriculture. It also refers
to capitalist entrepreneurs who rent land and hire workers, 2) the
class of proprietors – the landowners as well as the lords and the
title – owners. This class lives by obtaining profit created by the
productive class, rather than engaging in productive endeavors
themselves and 3) the sterile class or unproductive class – those
engaged in affairs outside agriculture, such as artisans and
merchants.

Possible Questions on Physiocracy

1. What do you think is the major factor for the rise of

Physiocracy in France?

2. In your view, what do you think are the contributions of

the Physiocrats?

3. Make a critical evaluation Physiocracy as compared to

Mercantilism