Summary
Highlights
Physiocracy was an 18th-century economic theory from France, opposing mercantilism. Physiocrats believed in economic and natural law, advocating against government interference. They saw land and agriculture as the sole source of a nation's wealth, making it the first well-developed economic theory that emphasized productivity over the accumulation of gold.
Richard Cantillon, an Irish-French economist, is best known for his 'Essay on the Nature of Trade in General,' considered the 'cradle of political economy.' A successful banker, Cantillon gained wealth through John Law's Mississippi Company. His essay, a major influence on early economic thought, introduced the concept of an entrepreneur as a risk-bearer and significantly impacted later economists like Adam Smith and François Quesnay.
François Quesnay, a leading physiocrat, coined the term 'laissez-faire.' At age 60, he published 'Tableau Économique' (1758), which used a circular flow diagram to illustrate economic production and consumption. Quesnay categorized the economy into landowner, farmer, and sterile classes, controversially viewing industry as sterile because he believed it did not produce a surplus. He advocated for economic reforms in France, including increased competition and free trade.
Anne Robert Jacques Turgot, another key physiocrat, significantly influenced Adam Smith. His 'Reflections on the Production and Distribution of Wealth' argued against government intervention, discussed the division of labor, analyzed price determination, and explored economic growth and interest rates. Turgot anticipated Smith's ideas on market and natural prices and recognized the law of diminishing marginal returns in agriculture. As an administrator and minister, he implemented laissez-faire policies, abolishing grain restrictions and the guild system, though his reforms were ultimately cut short.