ALCONABA, Jessica F. January 10, 2014

BSBE 4-2

HISTORY OF ECONOMIC THOUGHT

The Physiocrats: Wealth and Agriculture

I. Introduction: Physiocrats “The Economists”

The Physiocracy (from the Greek for "Government of Nature"), is an

economic theory developed by the Physiocrats, who were a group of economists

who believed that the wealth of nations was derived solely from agriculture. Their

theories originated in France and were most popular during the second half of the

18th century

They represented a reaction against the policies of Jean Baptiste Colbert

[1619-1683]. Colbert was served as a minister in the Court of Louis XIV. Colbert

advocated strict regulation of commerce, protective tariffs and is regarded as an

archetypical “Mercantilist.”

The Physiocrats represented an "alliance of persons, a community of ideas,

and acknowledged authority and a combination in purpose, which banded then into

a society apart." [Higgs] They held in common the idea that all things are part of an

interconnected system that is rational and comprehensible to the human mind. The

ideas of the Physiocrats lay the foundation for Adam Smith and the Classical

Economists. It was the Classical Economists who provided the intellectual map and

the justification for capitalism and market economies.

A key idea of Physiocracy was the true wealth of a nation as determined by

the surplus of agricultural production over and above that needed to support

agriculture (by feeding farm labourers and so forth). Other forms of economic

activity, such as manufacturing, were viewed as taking this surplus agricultural

production and transforming it into new products, by using the surplus agricultural

production to feed the workers who produced the extra goods. While these

manufacturers and other non-agricultural workers may be useful, they were seen as

'sterile' in that their income derives ultimately not from their own work, but from the

surplus production of the agricultural sector.

As a reaction against the extreme mercantilist policies of Colbert, the

Physiocrats advocated laissez faire policies. The believed that if the positive order or

rule of man could be made consistent with order nature (the order of nature not to be

confused with the state of nature), the well-being of society could be increased.

Given the complex and high levels of taxation of Louis XIV, one of the proposals was

a single tax on land. `

Major Tenets of Physiocracy Concept of the “natural order” - Laws of nature govern the human societies, all

human activities, therefore should be brought into harmony with this natural laws.

Individualism and laissez – faire - Each individual was best suited to determine

what goods he wanted and what work would provide him with what he wanted

out of life without government interference.

Diminishing Returns - This was a recognition that the productivity gains required

to increase national wealth had an ultimate limit, and, therefore, wealth was not

infinite.

Policy implications and proposals

Encourage Agriculture

Reform the tax

Importance of consumption to maintain income flows

Free trade, particularly in agricultural exports.

II. Historical Background

Colbert (1619-1683), served Louis XIV as an economic administrator and had

control of the French economy from about 1651 until 1683. He can be considered a

mercantilist and imposed strict regulations and taxes on the French economy. J.F.

Bell argues that the historical background of the Physiocrats would be a social

history of France. Years of wars and extravagance of the monarch left a society

ready for a new perspective that the Physiocrats provided. While they lasted only a

brief time, their ideas were powerful and left a permanent influence on the

development of economic thought.

Regulations

Under Colbertism, detailed regulations were imposed on prices and quality of

many goods. There were subsidies, tax exemptions, and protection against imports.

Encouragement of large families and a variety of other regulatory techniques were

prevalent. While many industries were regulated, an example is textiles. There were

controls on lengths, widths, threads, dyes, colours, etc.

Taxes

The Court of Louis XIV was extravagant and relied heavily on taxes to finance

the monarchy. A variety of taxes were imposed and contributed to the frustrations of

the writers and people. A few features of the taxes under Colbertism included: tax

collectors paid King for right to collect taxes

a. Taille - was a tax on land, house and presumed wealth. The tax was

levied on peasants, craft and bourgeois while the clergy and nobility were

exempt. The tax took as much as 50% of the earnings of the non-

privileged class.

b. Gabelle - every person over age 7 was required to buy 7 lb. salt each year

from the state owned salt monopoly

c. Aides - tax on goods when manufactured, transported or sold, “douanes” -

a general sales taxes

d. Traites - customs or duties on goods imported or exported History of

Economic Thought - Physiocrats - © Larry Reynolds, 2000 Page 3 of 6

e. Peasants were required to pay for the use of roads, bridges etc. and to

provide labor (corvée royale) to build and maintain these facilities.

Conditions

The regulative apparatus created to enforce Colbertism became corrupt and an

excessive burden. By the mid-18th century,

• The Population of France was about 25 million. Of this number 600,000 were

members of the clergy and nobles.

• Approximately 1/5 to 2/3 of land was owned by clergy in each province

• 9/10 [about 21 million] of population was engaged in agriculture

• 1 million serfs, about 500,000 owned land, some worked for subsistence and

small “wage,” some were share croppers (Metayers), some paid a perpetual rent

• England was “ahead” of France in industrial revolution and output. The agrarian

revolution in England [farming on a larger “scale”] was more developed than in

France.

• Under policies of Colbertism the French economy was highly regulated, there

were excesses by both Louis XIV and XV [wars, extravagances in the court, etc.]

• Industry/commerce added little to nat’l income due to regulation and protection.

There was a desire for reform.

A. Precursors

John Locke (1632-1704)

Views on natural rights, natural law, property rights and the role of the

individual in society influence the views of the Physiocrats.

Réne Descartes (1596-1650) Provides rationalism and belief in a system or order that can be

understood through reason.

Isaac Newton (1642-1727) Provides mechanical view of the natural world.

Jean François Melon (1675-1738) Was a mercantilist but provided some of the roots of Physiocracy

Was a secretary to John Law.

Believed that the necessaries of life were more important than gold.

Reacted against monopoly.

Pierre Boisguillebert (1646-1714) Wrote 5 major works between 1665 and 1707. However, he had no

systematic treatment of economy.

Encouraged direct taxes (rather than indirect) on all incomes.

Made three main attacks on mercantilism, (according to Hébert and

Ekelund)

a) The true nature of nat’l wealth is goods not money, [money is means

and method of wealth, not wealth]. He recognized the circulation and

velocity of money and goods.

b) He believed in the primacy of agriculture rather than trade as the

source of production and creation of wealth. He argued that the

mercantilist prohibition on export of grain caused cyclical variations in

price of grain and land.

c) He saw the French system of taxes as a major factor that inhibited

production.

John Law (1671-1729) Was the son of a goldsmith; born and educated in Edinburgh.

Shot and killed a rival in love affair then escaped to Europe.

Became a Financier in the Mississippi Company that collapsed. He

escaped, went to Belgium and eventually became a professional gambler

in Venice.

Believed in the use of money policy to manage the economy, money can

be created by banks

Identifies the diamond water paradox and saw same solution as Smith.

Richard Cantillon (about 1680-1734)

Created something of a system of economics, he was a model builder and

used abstract methods.

Published a major work in 1755, about 20 years after his death.

Was a Paris banker of Irish extraction. His work in economics

demonstrated a mechanical, rationalist approach.

According to Hébert and Ekelund, Cantillion was seeking basic principles

that governed the economy and society. In this effort, his contributions

include:

a) The treatment of population as an integral part of the economic process.

b) A theory to explain the location of cities and manufacturing.

c) That change in velocity are equivalent to changes in the quantity of

money.

d) Show the paths by which changes in the quantity of money influence

price.

e) Explain the adjustment of prices in international trade.

f) Consideration of the flows among sectors of the economy

He started with land as the source, “matter” of all wealth; labour is the

“form” that produces it [echoes of Locke]. `

He saw the economy and society as an interconnected, mechanical

process that was constantly adjusting through individual pursuit of profits

in a series of connected markets. The concept of the "entrepreneur" is

associated with Cantillion in this regard.

Hébert and Ekelund argue that Cantillion's system of three rents provides

the foundation for Quesnay's Tableau. Within the agricultural sector,

farmers pay a rent for the use of land. A second rent is paid for labour,

capital and raw materials. The farmer earns a residual or third rent that is

the net income. This system of three rents becomes the foundation for the

three segments of the economy in Quesnay's Tableau.

B. Leader - François Quesnay (1694-1774)

A surgeon who turned to medicine as the result of failing eyesight. Adam

Smith sent for Quesnay to treat the 3rd Duke of Buccleuch (a student

Smith was tutoring in France). Quesnay apparently was unable to come,

however. Smith was favorably impressed (and undoubtedly influenced) by

the ideas and ideals of the Physiocrats.

Began publishing in economics in 1756 (at the age of 62). Quesnay was

concerned about the state of the French economy, particularly agriculture

There is no single document or book that summarizes Quesnay's

economic system. He tended to write articles on specific topics. The

Tableau or more correctly according to Vaggi, several different Tableaus,

provides a rough structure for his system.

Economists identify a variety of ideas in the Tableau. The circular flow,

Keynes' multiplier, Walras' general equilibrium and Wassily Leontief's

input-output matrix are implied in Quesnay's model.

Quesnay's Tableau Economique

Economic model first described by Francois Quesnay in 1759.

Three economic classes:1. “Proprietary class” -landowners.

2. “Productive class” -agricultural laborers.

3. “Sterile class” - artisans & merchants

Productive work was the source of national wealth.

Therefore, the wealth of the nation was derived from agriculture.

Tax only the landowning class.

YULO, Jeffrey T.BSBE 2 – 1

C. Anne-Robert-Jacques Turgot

Turgot was close friends with Gournay and was influenced by his work. Turgot

like Gournay was influenced by English economics. Turgot maintained that he was not a

Physiocrat (like Gournay he was unwilling to accept that land alone was productive)

although he maintained close friendships with Du Pont and other Physiocrats. Turgot

took a strong laissez faire position and was an influence on Smith and Böhm-Bawerk.

Turgot was also friends with Condorcet (1743-1794). This association probably

influenced Turgot's position on social progress.

-early advocate of economic liberalism

- “French Adam Smith”

- predated Smith in recognizing the importance of the division of labor for an economy’s

prosperity

- was the first economist to recognize the law of diminishing marginal returns in

agriculture.

In Reflections, Turgot analyzed the interdependence of different rates of return

and interest among different investments, noting that interest is determined by

the supply and demand for capital. Although the rates of return on each investment may

vary, he argued, in a competitive free-market economy with capital mobility, rates of

return on all investments will tend toward equality:

As soon as the profits resulting from an employment of money, whatever it may

be, increase or diminish, capitals turn in that direction or withdraw from other

employments, or withdraw and turn towards other employments, and this necessarily

alters in each of these employments, the relation between the capital and the annual

product.

The Formation and Distribution of Wealth: Reflections on Capitalism by Anne-

Robert Turgot (Translated and Edited by Kenneth Jupp) is an important treatise on the

early foundations of capitalism. Turgot traces the development of early capitalism from

its inception through to the recapitulation of the five basic uses of capital.

Turgot believed that capital was useful to buy land with earning power, to invest

in agricultural enterprises by farming the land, to invest in trade or industry, to invest in

commercial enterprise and to lend in order to bring in a profit greater than the revenue

invested in the same sum as invested in land.

Turgot embraced the notion of thrift when he stated that thrift increases capital,

increases the number of lenders, and reduces the number of borrowers. Extravagance

produces the converse. Furthermore, the lowering of the rate of interest proves that

thrift has usually prevailed over extravagance. Since interest on money has declined in

Europe for centuries, the conclusion is that thrift rather than extravagance has been the

general rule, according to Turgot.

The author believed that there were two great subdivisions in society. These

subdivisions encompassed producers and wage earners. Producers extract from the

earth to furnish the whole of society with subsistence and raw materials. Wage earners

turn the raw materials into practical use by applying labor in exchange for subsistence

living. Herein lies an important negation in early capitalism.

Turgot explained the foundations of capitalism with considerable clarity, although

the capitalism of the 1700′s has evolved into an improved (although imperfect) model

today. At present, many workers receive compensation over the bare subsistence level.

Examples are municipal union workers, federal government employees, workers who

have access to profit sharing, workers who invest, as well as workers who inherit

legacies of property and other valuables. Lastly, today’s workers have access to

franchise forms of organizations, as well as alternative business models like affiiliates

and partnerships.

The Formation and Distribution of Wealth is an excellent reference on the

foundations of early capitalism. The book provides an important explanation of

capitalism’s basic premise. The idea of subsistence living in exchange for labor needs

to be reworked in order to have utility in the world of today.

Excerpts from “The Formation and Distribution of Wealth:

Rfl. 40

§19. How the proprietors may draw a revenue from their lands.

Rfl.41

The proprietors who do not cultivate their lands themselves, may adopt different

methods of cultivating them, or make different agreements with those who cultivate them.

Rfl.42

§20. First method, or cultivation by labourers on wages.

Rfl.43

They may, in the first place, pay men by the day or the year, to work their fields, and

reserve to themselves the whole of the produce; this includes a supposition that the proprietor

pays all advances, both for seed, and the wages of the labourers, until after the harvest. But this

method requires great labour and assiduity on the part of the proprietor, who alone can direct

his men in their labour, see that they employ their time well, and watch over their fidelity, that

they shall not carry away any part of the produce. It is true that he may pay a man of more

knowledge, and whose fidelity he knows, who, in quality of manager and conductor, may direct

the workmen, and keep an account of the produce; but he will be always subject to fraud.

Besides, this method is extremely expensive, unless a large population, or want of employ in

other species of labour, forces the workmen to content themselves with very low salaries.

Rfl.44

§21. Second method, cultivation by slaves.

Rfl.45

In times not very distant from the origin of society, it was almost impossible to find men

willing to work on the lands of another, because all the land not being as yet occupied, those

who were willing to labour, preferred the clearing of new lands, and the cultivating them on their

own account; this is pretty much the case in all new colonies.

Rfl.46

In this situation violent men then conceived the expedient of obliging other men by force

to labour for them. They employed slaves. These latter have had no justice to look for, from the

hands of people, who have not been able to reduce them to slavery without violating all the laws

of humanity. Meantime, the physical law of nature secures to them their part of the productions

which they have raised; for the master must necessarily nourish them, in order to profit by their

labour. But this species of recompence is confined to mere necessaries for their subsistence.

Rfl.47

This abominable custom of slavery has formerly been universal, and has spread over

the greatest part of the globe. The principal object of the wars carried on by the ancients was, to

carry off slaves, whom the conquerors either compelled to work for them, or sold to others. This

species of thieving, and this trade, still continues, attended with all its cruel circumstances, on

the coast of Guinea, where the Europeans encourage it by going thither to purchase negroes for

the cultivation of their American colonies.

Rfl.48

The excessive labour to which the greedy masters force their slaves, causes many of

them to perish; and it becomes necessary, to keep up the number requisite for cultivation, that

this trade should supply annually a very large number. And as war is the principal source which

supplies this commerce, it is evident that it can subsist no longer than the people continue

divided into very small nations, who are incessantly plundering each other, and every district is

at continued war with its neighbours. Let England, France, and Spain carry on the most cruel

hostilities, the frontiers alone of each state will be the only parts invaded, and that in a few

places only. All the rest of the country will be quiet, and the small number of prisoners they

could make on either side, would be but a weak resource for the cultivation of each of the three

nations.

Rfl.49

§22. Cultivation by slaves cannot exist in great societies.

Rfl.50

Thus when men are formed into great societies, the recruits of slaves are not sufficiently

numerous to support the consumption which the cultivation requires. And although they supply

the labour of men by that of beasts, a time will come, when the lands can no longer be worked

by slaves. The practice is then continued only for the interior work of the house, and in the end it

is totally abolished; because in proportion as nations become polished, they form conventions

for the exchange of prisoners of war. These conventions are the more readily made, as every

individual is very much interested to be free from the danger of falling into a state of slavery.

Rfl.51

§23. Slavery annexed to the land, succeeds to slavery properly so called.

Rfl.52

The descendants of the first slaves, attached at first to the cultivation of the ground,

change their condition. The interior peace among nations, not leaving wherewithal to supply the

consumption of slaves, the masters are obliged to take greater care of them. Those who were

born in the house, accustomed from their infancy to their situation, revolt the less at it, and their

masters have less need to employ rigour to restrain them. By degrees the land they cultivate

becomes their country, they become a part of the nation, and in the end, they experience

confidence and humanity on the part of their masters.

Rfl.53

§24. Vassalage succeeds to slavery, annexed to the land, and the slave becomes a

proprietor. Third method; alienation of the land for a certain service.

Rfl.54

The administration of an estate, cultivated by slaves, requires a careful attention, and an

irksome residence. The master secures to himself a more free, more easy, and more secure

enjoyment of his property, by interesting his slaves in the cultivation of it, and by abandoning to

each of them a certain portion of land, on condition of their paying him a portion of the produce.

Some have made this agreement for a time, and have only left their serfs, or slaves, a precious

and revocable possession. Others have assigned them lands in perpetuity, refining an annual

rent payable either in provisions or in money, and requiring from the possessors certain

services. Those who received these lands, under the condition prescribed, became proprietors

and free, under the name of tenant, or vassal; and the ancient proprietors, under the title of

lords, reserved only the right of exacting payment of the rent, and other stipulated duties. Thus it

has happened in the greater part of Europe.

Rfl.55

§25. Fourth Method. Partial colonization.

Rfl.56

These lands, rendered free at the expence of rent, may yet change masters, may divide

or reunite by means of succession and sale; and such a vassal may in his turn have more than

he can cultivate himself. In general the rent to which those lands are subject, is not so large, but

that, by cultivating them well, the cultivator is enabled to pay all advances, and expences,

procure himself a subsistence, and besides, an excess of productions which form a revenue.

Henceforth the proprietary vassal becomes desirous of enjoying this revenue without labour,

and of having his lands also cultivated by others. On the other hand, the greater part of the lords

grant out those parts of their possessions only, which are the least within their reach, and retain

those they can cultivate with the least expence. The cultivation by slaves not being practicable,

the first method that offers, and the most simple to engage free men to cultivate lands which do

not belong to them, was, to resign to them such a portion of the produce, as would engage them

to cultivate better than those husbandmen who are employed at a fixed salary. The most

common method has been to divide it into equal parts, one of which belonged to the cultivator

and the other to the proprietor. This has given place to the name (in France) ofmetayer

(medietarius) or cultivator for half produce. In arrangements of this kind, which take place

throughout the greatest part of France, the proprietor pays all contingencies; that is to say, he

provides at his expence, the cattle for labour, ploughs, and other utensils of husbandry, seed,

and the support of the cultivator and his family, from the time the latter enters into the metairies

until the first harvest.

Rfl.57

§26. Fifth method. Renting, or letting out the land.

Rfl.58

Rich and intelligent cultivators, who saw to what perfection an active and well directed

cultivation, for which neither labour nor expence was spared, would raise the fruitfulness of land,

judged with reason that they would gain more, if the proprietors should consent to abandon, for

a certain number of years, the whole of the harvest, on condition of receiving annually a certain

revenue, and to be free of all expences of cultivation. By that they would be assured that the

increase of productions, which their disbursements and their labour procured, would belong

entirely to themselves. The proprietor, on his side, would gain thereby, 1st, a more tranquil

enjoyment of his revenue, being freed from the care of advances, and of keeping an account of

the produce; 2d, a more equal enjoyment, since he would receive every year the same and a

more certain price for his farm: because he would run no risk of losing his advances; and the

cattle and other effects with which the farmers had stocked it, would become a security for his

payment. On the other hand, the lease being only for a small number of years, if his tenant paid

him too little, he could augment it at the expiration thereof.

Rfl.59

§27. The last method is the most advantageous, but it supposes the country already rich.

Rfl.60

This method of securing lands is the most advantageous both to proprietors and

cultivators. It is universally established where there are any rich cultivators, in a condition to

make the advances necessary for the cultivation. And as the rich cultivators are in a situation to

bestow more labour and manure upon the ground, there results from thence a prodigious

augmentation in the productions, and in the revenue of the land.

Rfl.61

In Picardy, Normandy, the environs of Paris, and in most of the provinces in the north of

France, the lands are cultivated by farmers; in those of the south, by the metayers. Thus the

northern are incomparably richer and better cultivated than the southern provinces.

Rfl.62

§28. Recapitulation of the several methods of making lands productive.

Rfl.63

I have just mentioned five different methods by which proprietors are enabled to ease

themselves of the labour of the cultivation, and to make their land productive, by the hands of

others.

By workmen paid at a fixed salary.

By slaves.

By ceding their lands for rent.

By granting to the cultivator a determined portion, which is commonly half the produce,

the proprietor paying the advances necessary for the cultivation.

By letting their land to farmers, who undertake to make all the necessary advances, and

who engage to pay to the proprietors, during the number of years agreed on, a revenue

equal to its value.

Rfl.64

Of these five methods, the first is too expensive, and very seldom practised; the second is only

used in countries as yet ignorant and barbarous; the third is rather a means of procuring a value

for, than abandoning of the property for money, so that the ancient proprietor is no longer any

thing more than a mere creditor.

Rfl.65

The two last methods of cultivation are the most common, that is, the cultivation by metayers in

the poor, and by farmers in the richer countries.

D. Jacques Claude Marie Vincent, Marquis de Gournay (1712-1759)

Gournay is credited with the phrase "laissez faire, laissez passer." ("Let do and

let pass, the world goes on by itself!")

His work is closely associated with the Physiocrats while both Vaggi and

Groenewegen point out that he is not technically a Physiocrat. Unlike the Physiocrats,

Gournay places industry and trade important roles in economic growth and

development. Groenewegen comments that Gournay is ". . . a founder of a separate

non-Physiocratic free trade school. This non-Physiocratic free trade school includes

Turgot, Morellet and Trudaine. Gournay was closely associated with Turgot.

Gournay, a man of dialogue and networks is closely linked with a number

of Encyclopaedists and young officials in which he has a great influence, without leaving

a written theoretical work. He would have had at the end of his life, exchanges of views

with Quesnay , founder of the school Physiocratic , but their positions differ. Notably, he

did not see all the wealth in the earth, he did not neglect, but felt that the industry and

commerce also create real value. In 1753, he argues on behalf of the competition to

create the distillery Jesuits of La Fleche, and manufactures linen (Pinel) of Narbonne,

against the Marseille port monopoly.

"The role of manufacturing in the views of the State is to produce less to enrich a

particular manufacturer, to give employment to the largest number of poor and idle

people as possible, because that the State certainly enriched when everyone is busy

there ...  "he says, January 19, 1754.

From 1752 he Trudaines written request to release the wheat trade, he was in

favor of free trade, without neglecting emulation, encouragement and protection. It

completes the claim Laissez faire in maxim "  laissez-faire and pass  "to conclude in

September 1753 his thoughts on smuggling in the following terms:"  These two words,

and let them pass, as two continuous sources actions are therefore for us both continual

sources of wealth  . "

Gournay system rejects the mercantilist and is not at the origin of the Physiocrats

ruralists designs, which are peculiar to the physician François Quesnay , or the

utilitarian liberalism absolute Adam Smith. He bequeathed to these theoretical schools

of thought its commitment to the protection of persons in conjunction with the economic

freedoms. Supporter of free trade, produce, work, he denounced the meddlesome

bureaucracy which he coined the name,direct state intervention in the economy by

permanent aid (the state must remain primarily confined to functions of public order),

but also corporations , guilds, exclusive privileges, such as the East India Company and

certain ports.

End of 1756, he supported the creation of the Society of Agriculture, Commerce

and Arts of Britain , which will define the tasks and write the articles. Trudaines and

Bertin impose Agricultural Societies in all countries and General State in the kingdom,

which will broadcast the thought of Gournay, up to and beyond the French Revolution.

It directly inspired Turgot , Quesnay or Trudaines and Malesherbes , Silhouette,

Bertin ... , And more generally the French liberal economic tradition.

III. Core Beliefs

The Physiocrats believed in the existence of a “natural order,” or ordre naturel.

They appealed to rational principles in the tradition of a “Cartesian” perspective. The

cosmos was seen as a hierarchically and harmoniously arranged order. There was a

distrust of “data,“ “positive” law and human behavior. The social order, “ordre positif”

should be consistent with the “natural order, ordre naturel.” The Physiocrats “deduced”

a connected series of doctrines based on premises and endeavored to include all social

phenomena connected with the production of wealth. The natural order was not to be

confused with state of nature. The natural order was founded on law and property

rights. They denied that every one has a right to everything: A “Bird has a right to a

insect that it can catch.” They believed that liberty and equality were incompatible. As a

society grows wealthier, inequality increases. Men in society are subject to natural laws

in the same way that the equilibrium of nature is maintained by physical laws. The

Physiocrats saw the interrelation between physical and social phenomena, but physics

and biology were not highly developed in modern sense. There was an emphasis on the

individual and individual rights. It was believed that the individual knows their interests

and will act on those interests. The principle idea embedded in Physiocracy is that of

“self interest” as the motivating force in the economy. The rights of each individual

limited the rights of others. “Freedom of the foolish man must be restricted by the state.”

Doctrines of the School

In Francois Quesnay’s writings before 1758 dealt largely with medicine and

included two articles, "Fermiers" and "Grains.""Fermiers" advocated improving

agriculture production through use of horses. In "Grains" he proposed that France

should stimulate agricultural production, particularly grapes and grain, and use this

production in foreign trade rather than emphasizing manufactured goods.

The doctrine of the Physiocrats was based on the axiom that agriculture alone

was productive. They believed that all wealth originated with the land and that

agriculture alone could increase and multiply wealth.

IV. Influence of the School

The Physiocrats form at once the first and the most compact school to be

encountered in the history of economics. The first to share and provoke a widespread

enthusiasm for the study of economic causes and effects, they stood boldly together —

daring, original, sometimes paradoxical, but rendering great service to future ages by

their luminous and penetrating theories, which spread like a wave over the whole

Continent. The rulers of the earth did not disdain to learn from them. And though their

own country, for which they wrote and worked, still turns adeaf ear to one part of their

pleading, it must be remembered that Adam Smith and Pitt, Huskisson, Peel, and

Gladstone have but repeated their arguments in endowing us, for better or for worse,

with our settled policy of Free Trade.