The Physiocrats

Overview

The Physiocrats were the first organized school of economic thought, active in France in the mid-to-late 18th century and led by the court physician François Quesnay (1694–1774), the statesman-economist A.R.J. Turgot (1727–1781), and the publicist Victor de Riqueti, marquis de Mirabeau ("the elder Mirabeau"). The name derives from the Greek phýsis ("nature") and kràtos ("power"): they held that an economy's wealth flowed ultimately from the land, and that only the agricultural sector produced a genuine surplus — the produit net (net product) — over and above the costs of cultivation.[1]

Quesnay set out this vision in his Tableau économique (1758), a "zigzag" circular-flow diagram tracing how output and spending moved among three classes: landowners, the productive (agricultural) class, and a "sterile" class of manufacturers and others who, in the Physiocratic model, merely consumed what they produced and left no surplus for the next period.[1] Because in their theory only land generated a true surplus, the Physiocrats argued that all the miscellaneous taxes, tolls, and regulations burdening the French economy should be swept away and replaced by a single tax falling on that surplus — the impôt unique, a single tax on the net product of land. Henry George reports that the elder Mirabeau "ranked the proposition of Quesnay, to substitute one single tax on rent (the impôt unique) for all other taxes, as a discovery equal in utility to the invention of writing or the substitution of the use of money for barter."[2] Quesnay also coined the phrase "laissez-faire, laissez-passer," and the school's attack on the mercantilism of Louis XV's finance minister Colbert anticipated much of classical free-trade economics.[1] Turgot, as intendant of Limoges and later finance minister (1774–1776), attempted to put Physiocratic reform into practice, and his analysis of capital, competition, and diminishing returns anticipated Adam Smith.[3]

Relevance to Georgism

The Physiocrats are the most direct pre-classical ancestors of the Georgist single tax. The lineage runs Physiocracy → the classical critique → George:

• The idea George revived. In Progress and Poverty, George explicitly credits the school: "The French Economists of the last century, headed by Quesnay and Turgot, proposed just what I have proposed, that all taxation should be abolished save a tax upon the value of land."[2] He acknowledged reaching his own conclusion independently — "Without knowing anything of Quesnay or his doctrines, I have reached the same practical conclusion by a route which cannot be disputed"[2] — but recognized the Physiocrats had grasped "the fundamental relation between land and labor which has since been lost sight of."[2]
• The classical hand-off. Adam Smith met the Physiocrats in France and admired them, while criticizing the doctrine that manufacturing is "sterile"; through Smith and Ricardo the analysis of rent passed into classical economics, where George picked it up.[1] The Physiocrats thus form the first link in the chain that produced the law of rent.
• Where George honestly differed. George taxed land rent — the value of location and the unearned increment — not merely agricultural produce, and he rejected the Physiocrats' claim that only agriculture is "productive." He treated their peculiar terminology cautiously, saying he knew their doctrines "only at second hand" and could not tell how far their ideas about "agriculture being the only productive avocation" were "erroneous apprehensions, or mere peculiarities of terminology."[2] The Physiocrats' surplus was tied to farming; George's rent arises wherever fixed natural opportunities command a premium — a broader and, in modern terms, sounder basis for the same single-tax conclusion (see the rent gradient: land is the clean, fixed-supply case).

See Also

• Single Tax — George's proposal, of which the impôt unique is the 18th-century forerunner
• Land Value Tax — the modern instrument descended from this lineage
• Adam Smith — the classical economist who absorbed and criticized Physiocracy
• Henry George — who revived the single-tax idea on a rent rather than agricultural basis
• Law of Rent — the Ricardian theory of rent that grew out of the classical response to Physiocracy
• Economic Rent — the surplus the Physiocrats located in land

Sources

1. David R. Henderson (ed.), "François Quesnay (1694–1774)," The Concise Encyclopedia of Economics / Library of Economics and Liberty (Econlib). econlib.org — used for Quesnay as leader of the first school of economics, the origin of the name "Physiocrat," the Tableau économique and its three classes (landowners, farmers, "sterile"), the produit-net/surplus doctrine, "laissez-faire, laissez-passer," and the critique of Colbertist mercantilism.
2. Henry George, Progress and Poverty (1879), Book VIII (Application of the Remedy). Project Gutenberg eBook #55308. gutenberg.org — used for George's acknowledgment that Quesnay and Turgot "proposed just what I have proposed," for Mirabeau's praise of the impôt unique as a discovery equal to the invention of writing, for George's statement that he reached the conclusion independently, and for his honest reservation about the Physiocrats' "agriculture being the only productive avocation" doctrine.
3. David R. Henderson (ed.), "A.R.J. Turgot (1727–1781)," The Concise Encyclopedia of Economics / Library of Economics and Liberty (Econlib). econlib.org — used for Turgot as a leading Physiocrat and reformer, his theory of capital, competition, and diminishing returns, his anticipation of Adam Smith, and his tenure as intendant of Limoges and finance minister (1774–1776).