The Physiocrats 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. Physiocracy was perhaps the first well developed theory of economics.

Historian David B. Danbom explains, "The Physiocrats damned cities for their artificiality and praised
more natural styles of living. They celebrated farmers." [1]

They called themselves conomistes (economists) but are generally referred to as Physiocrats in order to
distinguish them from the many schools of economic thought that followed them. Physiocrat is derived
from the Greek for "Government of Nature".

The principles of Physiocracy were first put forward by Richard Cantillon, an Irish banker living in
France, in his 1756 publication Essai sur la nature du commerce en gneral (Essay on the Nature of
Commerce in General). The ideas were later developed by thinkers such as Franois Quesnay and Jean
Claude Marie Vincent de Gournay into a more systematic body of thought held by a united group of
thinkers.

The Physiocrats saw 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.

The Physiocrats strongly opposed mercantilism, which emphasized trade of goods between countries, as
they pictured the peasant society as the economic foundation of a nation's wealth.

The Physiocrats enjoyed some support from the French monarchy and frequently met at Versailles. Adam
Smith, who visited France as a tutor and mentor to the Earl of Buccleigh's son's Grand Tour, was heavily
influenced by the ideas of the Physiocrats, and Karl Marx cites them as a reference in Das Kapital; they
popularized the modern version of the labor theory of value.

There are several key concepts that lay the foundation of the Physiocratic doctrine.
Quesnays Tableau conomique
Individualism and Laissez faire regulation of commerce
Private Property
Diminishing returns
The need for working capital and reinvestment of capital

Quesnays Tableau conomique

Individualism and Laissez Faire

The Physiocrats, especially Turgot, believed that self-interest was the motivating reason for each segment
of the economy to play its role. Each individual was best suited to determine what goods he wanted and
what work would provide him with what he wanted out of life. While a person might labor for the benefit
of others, he will work harder for the benefit of himself; however, each persons needs are being supplied
by many other people. The system works best when there is a complementary relationship between one
persons needs and another persons desires, and trade restrictions place an unnatural barrier to achieving
ones goals.
Private Property

None of the theories concerning the value of land could work without strong legal support of ownership
private property. Combined with the strong sense of individualism, private property becomes a critical
component of the workings of the Tableau.

Diminishing Returns

Turgot was one of the first to recognize that successive applications of the variable input will cause the
product to grow, first at an increasing rate, later at a diminishing rate until it reaches a maximum (3, p.
195) This was a recognition that the productivity gains required to increase national wealth had an
ultimate limit, and, therefore, wealth was not infinite.

Investment Capital

Both Quesnay and Anne Robert Jacques Turgot, Baron de Laune recognized that capital was needed by
farmers to start the production process, and both were proponents of using some of each years profits to
increase productivity. Capital was also needed to sustain the laborers while they produced their product.
Turgot recognizes that there is opportunity cost and risk involved in using capital for something other
than land ownership, and he promotes interest as serving a strategic function in the economy. (3, p. 196)

Famous Physiocrats:
Richard Cantillon
Franois Quesnay
Anne Robert Jacques Turgot
Jean Claude Marie Vincent de Gournay
Victor de Riqueti, marquis de Mirabeau
Count de Mirabeau
Pierre Samuel du Pont de Nemours
Stanisaw Staszic

Adam Smith and David Hume were the founding fathers of antimercantilist thought; This practice
was strongly attacked by Adam Smith in his 1776 work The Wealth of Nations. The criticisms of
mercantilism are given elaborately Mercantilists viewed the economic system as a zero-sum
game, in which a gain by one country results in a loss by other. Adam Smith & David Ricardo
argued that, trade should be a positive-sum game, or a situation in which all countries can benefit.
Mercantilism unduly emphasized the importance of money and over-emphasized the importance of
gold and silver. So Mercantilist ideas about wealth were nonsensical and untenable.