The Economics of François Quesnay

Few aspects of the history of economic analysis enjoy such a clear-cut and unquestioned interpretation as physiocracy.¹ The major elements chosen for praise are usually Quesnay’s concept of net product, his study of the physical characteristics of capital — the different types of advances — and the presentation of a general description of the economy as a model of reproduction. Most of these features were remarked upon by Marx in the Theories of Surplus Value (see Marx, 1963, vol. I, pp. 308–10, and the rest of ch. 6), and in a chapter which he wrote for Engels’ Anti-Dühring (see Engels, 1878, pp. 268–77). More recently, the physiocrats have been praised for being ‘the first to proclaim the doctrine of free-trade’ (Marshall, 1890, p. 625), for having anticipated a general equilibrium system (see Schumpeter, 1954, p. 242) and, above all, for the first use in economics of a rough input-output table (see Phillips, 1955, pp. 137–8; Leontief, 1951, p. 9; Maital, 1972, p. 505).

In this chapter I will show that the physiocrats did not regard wealth and revenue as mere collections of physical quantities of primary goods, as is usually believed.¹ For Quesnay the amount of consumable agricultural produce is the basis of the prosperity of the people, but only the value magnitude of wealth can be used to compare the economic power of France with that of other countries. In order to become part of the nation’s wealth products must pass through markets, where they are exchanged according to certain monetary prices. Quesnay contends that a specific concept of price — that which rules the ‘sales at first hand’ — must be employed to measure the country’s wealth. He uses this particular idea of price to deny the quality of ‘productive’ to those exchanges that take place after the first sale of a product, which he calls ‘resale trade’.

The doctrine of the exclusive productivity of agriculture constitutes the physiocrats’ reply to the question of the origin of surplus and wealth. This was their major concern and provides the necessary foundation for all their policy recommendations. The single tax on rent, a commercial policy in favour of the products of land, and the encouragement given to their consumption, are all measures deriving from the belief that only the primary sector yields a net product. This theory must be considered as a hypothesis in some works of the physiocrats, and above all in the different types of Tableaux, but it is not a postulate in the whole of physiocratic economics. Far from simply assuming the existence of a net output only in agriculture, Quesnay and his disciples want to explain this fact and try to convince their opponents. The physiocrats intend to put forward a theory of the origin of national wealth and of ways of increasing it.

Quesnay’s analysis of prices and markets has important consequences for his theory of the distribution of surplus. It is usually believed that in physiocracy the surplus accrues entirely to the landowners, as rent (see for instance Marx, 1970, vol. I, p. 477; 1967, vol. II, p. 784). The net product also includes the taille, which makes up the sovereign’s revenue, and the church’s dîme. In the first part of this chapter it will be shown that rent is not the only form taken by the net product when it is distributed among the classes because the physiocrats also regard the profits of farmers as part of the social surplus. It emerges that this interpretation of the physiocratic theory of distribution is perfectly consistent with the price concepts put forward by Quesnay; in particular profits are shown to be given as the difference between the current and the fundamental price. Textual evidence will show that it is possible to give a precise definition of Quesnay’s concept of profit, and of its role in physiocratic economics. As a result of this new approach, the notion of bon prix acquires a precise meaning and a definite analytical role. It includes the profits of cultivators, which are the normal and regular source of the accumulation of capital. In fact, apart from the philological evidence, it will emerge that the physiocrats regarded farmers’ profits as part of the net product, because this is the only element of the annual surplus which can ensure an increase in the means of production in agriculture.

In the previous chapters we have seen that an analysis of the role of markets and prices in Quesnay’s economics brings to the fore many new elements, which call for a reassessment of its place in the history of economic thought. Most of the traditional reasons for praising Quesnay are confirmed by examining his value theory; but it appears that he has unfairly been held responsible for such failures as the lack of an analysis of prices and markets. However, a reinterpretation of physiocracy cannot be limited to a vindication of Quesnay, and it would be equally useless simply to single out the bits of economic theory which he first put forward.