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Physiocracy is concerned with the belief in the existence of a ‘Natural Order’. The role of the state is seen as simply preserving property and up-holding the natural order. Physiocrats held the belief that agriculture was the only source of wealth and therefore that sector should not be taxed, they believed in the advocacy of free trade.

Physiocracy was born in France and was at it’s peak during the period prior to the French revolution. 

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PHASE ONE  (1756-1760)

  • 1758 - ‘Tableau Economique’ was published, this showed a circular flow of wealth.

  • 1760 – Quensay writes a theory on taxation, in which all existing taxes should be scrapped and replaced by a single tax, so the tax on rent is introduced. Met opposition from landlords and tax collectors.

 PHASE TWO (1760-1764)

  • Physiocrats go underground and publish ‘Political Economy of Agriculture’, the French government accepted free trade within France, the Physiocrats attract more followers.

 PHASE THREE (1764-1767)

  • Reforms in this period were a direct result of the physiocrats theory of value and distribution. Quensay argued that under free trade, the merchants and landlords gains would be diminished greatly, whilst the farmers would increase their rate of profit.

  • Quensay believed that demand at home was not enough to push up agricultural prices, therefore agricultural remained backward (i.e not enough effective demand), but that the exportation of agricultural products especially corn would mean higher prices. This would, he thought maintain the rate of profit in agriculture and maintain the rate of profit with prices moving to the ‘Bon-Prix’ (Price of growth). As prices rise in the long term, so he supposed the productivity of land would rise, resulting in a increased surplus.

 PHASE FOUR (1767-1777)

  • The physiocrats attracted more enemies. There was growing opposition to the deregulation of the corn trade, which finally undermined physiocracy. Deregulation meant the price of corn in the wholesale and retail markets rose during the 1760’s, possibly attributed to some poor harvests, however the physiocrats were accused of worsening the supply of corn for the French people, which was important as corn was the most popular good consumed. A new minister of general affairs was appointed, the standing of the physiocrats was at an all time low. 1770 saw the re-introduction of regulations for the corn trade. The final glimpse of physiocracy came from Turgot who abolished all restrictions on the corn trade within France. Turgot dissolved medieval guilds and curbed spending to reduce the burden of luxury, consumption on surplus and wanted to keep the taxation of agriculture to a minimum, however he came up against opposition and was removed in 1776.

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  • Methodology from books to political economy.
  • Influenced by the input-output method all command economies used input-output methods.
  • Surplus defined.
  • Gave a definition of Capital.
  • Gave a definition of productive and non-productive labour.
  • Natural Order.
  • First notion on the law of diminishing returns.
  • Free Trade/Laissez-faire.
  • Limited State Intervention.
  • Showed the problems with introducing a free market economy

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(c)  Est 08/00 - Last Updated 28/05//2001