Physiocratic economic analysis

Royce, Gerald Arthur (1962) Physiocratic economic analysis. PhD thesis, University of Glasgow.

Abstract

The physiocrats made several particularly significant contributions to economic theory. One of the most important and better known is Quesnay's theory of capital. Generalizing from the experience of the agricultural revolution in England and France, Quesnay theorized on this situation in which wealth could be greatly increased by intensive investment in Real Capital - that is to say, in the material means of production; subsistence goods for the maintenance of labourers, raw materials to be worked up, and machines, improvements on the land, and better and more numerous farm animals, all of which were needed to facilitate the more efficient production of the new farm technology. Real Capital was thought of as an advance of material stuff needed to bridge the temporal gap between productive effort and the final sale of consumer's goods. The physiocrats can be given almost the entire credit for this Advance Theory of the Productiveness of Capital. This Is basically the same theory that was adopted and popularized by Adam Smith; it was to dominate all thinking on capital throughout the whole of the next century. Several of Quesnay's disciples went on to generalize this theory of capital so as to cover capital-intensive industry which was then emerging at a rapid pace. It is first with the physiocrats that the accumulation of Real Capital (as opposed to monetary capital) comes to be considered the chief variable determining the productiveness of the economic machine. All other branches of their theory are tied to this one central idea. One of the more important examples of this Is Quesnay's tableau economique, his diagrammatic picture of general intra-sectorial equilibrium. The process of simple reproduction as depicted by the tableau begins with an advance of capital and continues through annual advances. The concept of intra-sectorial equilibrium was not completely unknown when Quesnay formalized it by this diagrammatic model. It was at least suggested by Cantillon. And this kind of theory was a dominant theme in the work of their predecessor Boisguillebert who, moreover, applied it to the same problems as did the physiocrats. Boisguillebert and the physiocrats were of the opinion that mercantilist policy had forced the growth of the commercial and manufacturing sectors to such an extent that it had outpaced the growth of the agricultural sector. Discriminatory government policies (taxation policy being the most disruptive) had, they complained, so impoverished agriculture that it was no longer able to provide an equilibrium cost-covering demand for the goods and services of the non-agricultural sectors. This disequilibrium was the basic cause to which they attributed the persistent stagnation of the French economy. The physiocrats gave greater refinement to Boisguillebert's original rendition of this Dispro-portionality Theory of Crises by explaining disequilibrium in terms of sectorial over-accumulation of capital. Other parts of their theory, such as their theories of taxation and population, also gained by being joined to their insights on capital. The one theory that sets the physiocrats apart from all other schools of thought is their unique productivity doctrine - the erroneous idea that the agricultural sector of the economy is the only source of wealth. This doctrine rests on two misapprehensions. Firstly, they failed to realize that exchanges within the industrial and commercial sectors create income (exchange values) in exactly the same way as income is created by exchanges between these sectors and agriculture. Secondly, they were inclined to identify value productivity with physical productivity, viewing the whole economic process as the production and working up of raw materials. However, Quesnay himself was not completely faithful to this latter train of reason; he had no compunctions about explaining the same economic process as the creation of utilities and market values. Quesnay's own explanation of the demand side of the economic equations is one of the best up to his time (the tour de force being his demand schedule explanation of the emergence of rent). The physiocrats thought of their single tax theory as a theorem derived from the circumstances of land's unique productivity, though the reasons they gave for all taxes falling on the pure rent of land do not depend upon this doctrine at all. (Abstract shortened by ProQuest.).

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Additional Information: Adviser: Ronald L Meek
• Keywords: Economic theory
• Date of Award: 1962
• Depositing User: Enlighten Team
• Unique ID: glathesis:1962-73521
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 14 Jun 2019 08:56
• Last Modified: 14 Jun 2019 08:56
• URI: https://theses.gla.ac.uk/id/eprint/73521