Warren J. Samuels
The Physiocratic Theory of Economic Policy
Quarterly Journal of Economics, 76(1)
Feb. 1962, pp. 145-162
The conventionally accepted interpretation of the Physiocratic theory of economic policy 1 is that of laissez faire. While partial dissents have been registered, the laissez faire view has persisted substantially unchallenged. The purpose of this article is to restate the theory of economic policy to which Physiocratic doctrine can be meaningfully and operationally reduced, including a delineation of the role of laissez faire.
In an earlier article, this writer has shown that the Physiocratic theory of property-state relations encompassed an activist role of the state in the utilitarian and continuing modification of property rights. 2 Developing the inference implicit therein, the author will show here that laissez faire is an inadequate characterization of the Physiocratic theory of economic policy. While the Physiocrats ostensibly advocated the principle of nonintervention (thereby reflecting “...the spirit of an age or the truth of an idea so great that it moved a generation”), 3 a valid statement of their theory of policy has to depart significantly from such an interpretation. As one writer has put it, “Laissez-faire was a leaf out of their book, but not enough to be the title of what they had to say.” 4
The author will demonstrate that laissez faire has a place only within the broader dimensions of the Physiocratic theory of economic policy, the latter deriving its basic character from its activism as a theory and program of social change and social control. These
1. Meaning thereby the “general body of principles of government action or inaction — the agenda or non-agenda of the state as Bentham called them -in regard to economic activity.” Lionel Robbins, The Theory of Economic Policy in English Classical Political Economy (London: Macmillan, 1953), p. 2.
2. Warren J. Samuels, “The Physiocratic Theory of Property and State,” this Journal, LXXV (Feb. 1961), 90-111.
3. Henry Carter Adams, quoted in Introductory Essay by
Joseph Dorf man (ed.), in
4. D. H. MacGregor, Economic Thought and Policy (New York: Oxford University Press, 1949), p. 66.
activist dimensions encompass programs of (a) social reconstruction, (b) economic development, and (c) economic stability, and comprise the fundamental economic functions of Physiocratic government.
As with the Physiocratic theory of property and state, the traditional interpretation finds support in certain of the Physiocrats’ own statements. In his article “Grains,” Quesnay argued: “...all commerce must be free.... It suffices in the government. . . to not hinder the activity at all...” In the Maximes Genérales is found the clearest and most frequently cited statement giving doctrinal credence to the laissez faire view:
That there be maintained the complete freedom of commerce; for THE POLICY OF INTERIOR AND EXTERIOR COMMERCE THE MOST SURE, THE MOST EXACT, THE MOST PROFITABLE TO THE NATION AND THE STATE, CONSISTS IN THE FULL FREEDOM OF COMPETITION. 5
Quesnay’s advice to the Dauphin is well known, as is that of la Rivière to Catherine the Great. La Rivière also wrote that:
The movements of society are spontaneous and not artificial, and the desire for joy which manifests itself in all its activities unwittingly drives it towards the realization of the ideal type of State.
As Gide and Rist comment, “This is laissez-faire pure and simple.” The view is reflected in Baudeau’s declaration: “Remove all useless, unjust, contradictory, and absurd laws, and there will not be much legislative machinery left after that,” and in Turgot’s letter to Terray:
Whatever sophisms the self-interests of some commercial classes may heap up, the truth is that all branches of commerce ought to be free, equally free, entirely free;… 7
The Physiocrats also emphasized naturalism to denigrate government and government policy: “Legislation, if conformable to nature, was unnecessary, and if in violation of it, certain of defeat, for in the long run nature was the strongest.” 8 Man did not make the laws of the natural order, he only executed them; 9 and, what is more, attempts to direct the course of nature were futile, for “...the result would only be to let things go precisely as they would have gone of themselves... 1
5. Auguste Oncken (ed.), Oeuvres Economiques et Philosophiques do F. Quesnay (Paris: Joseph Baer, 1888), pp. 240-41, 336; see also pp. 359-77, 747-58.
6. Charles Gide and Charles Rist, A History of
Economic Doctrines (
7. W. Walker Stephens (ed.), The Life and Writings of Turgot (New York: Longmans, Green and Co., 1895), p. 252, see also pp. 293, 235, 249, 250.
8.0. F. Boucke, The Development of Economics (New York: Macmillan, 1921), p. 67.
9. Oncken, op. cit., p. 802.
1. Turgot quoted in Stephens, op. cit., pp. 254-55.
Thus wrote the Physiocrats of nonintervention. While they did not use the term themselves, 2 they often wrote, and perhaps largely •understood, in the manner of the doctrine of laissez faire. It must be said then that the Physiocrats, perhaps because of their preoccupations, did not fully appreciate the significance of many of their own ideas. 2 Or perhaps they did, and for that reason avoided the phrase. In either case, their general statements are at odds with both broad and particular aspects of their own scheme of policy, and neither exhaust nor characterize the Physiocratic theory of economic policy.
For purposes of policy analysis the essence of Physiocracy is its involvement in and proposal of change. Comprising a program for the reconstitution of the fabric of society, and for the redirection of the path of social development, Physiocracy is policy: for the proposal of change is a matter of choice, which is in every respect (given the realm of possibilities capable of being acted upon and their probable achievement) a matter of policy. Fundamental, then, to the Physiocratic theory of economic policy is the recognition of Physiocracy as a system of social reconstruction and redirection, the substance of the Physiocratic answer to the question of choice becoming the primary object of policy.
Considered as a program for social change, it is evident that the Physiocratic system was of considerable breadth, “a social philosophy embracing what today would be included in economics, politics, sociology and ethics,” 4 which, however, “places economic considerations into the foreground.”5 It may be argued that recognition of the breadth of Physiocratic thought is responsible for the inclusion of socio-economic change as a dimension of Physiocratic policy and further that such is unnecessary or undesirable. The counter-
2 .See MacGregor, op. cit., pp. 54-67; Gide and Riat, op. cit., p. 11; also Oncken, op. cit., p. 804.
3. Haney, for example, calls attention to “… the crisp, sweeping exaggerations of the Physiocratic system…” (Lewis H. Haney, History of Economic Thought (4th ed.; New York: Macmillan, 1949), p. 205.) A. P. Usher argues that, “The more critical writers were, perhaps, not without some mental reservations, but in the highly abstract generalizations with which they were primarily concerned, the exceptions did not seem important.” (A. P. Usher, “Laissez Faire and the Rise of Liberalism,” in Explorations in Economics: Notes and Essays Contributed in Honor of F. W. Taussig (New York: McGraw-Hill, 1936), p. 406.) See also Gide and lUst, op. cit., p. 30.
4. Thomas P. Neil, “Quesnay and Physiocracy,” Journal of the History of Ideas, IX (Jan. 1948), 164.
5. Joseph A. Schumpeter, Economic Doctrine and Method (New York: Oxford University Press, 1954), p. 46.
argument may be advanced, however, that economic policy for the Physiocrats did in fact comprise a program of change, and to ignore such is to make sterile the scope of economic policy.
The crucial matter, however, is not the breadth of Physiocratic thought but its activism. 6 The Physiocrats were primarily concerned with the question of how the economy should be organized and controlled, and this preoccupation governed the nature of their theory. Physiocracy was not just a system of theory, meaning by “theory” either the identification and explanation of assumed pre-existent phenomena, or the systematic analysis of the employment of means given an hierarchy of ends already extant. Rather than being Aristotelian in their theory (i.e., theory as explanation: what is the phenomenon, and how and why did it come about?), the Physiocrats were essentially proposing what should be the case, and in their writings both justifying the rationale of their system and describing how it would work. The Physiocrats were thus promulgators of theory as a constructive proposal, ergo Platonic and normative. Since they did not accept the economic status quo, their analysis involved an ends-means model reaching back to the basic foundations of society, and their theory was accordingly activist rather than predictive. As Myrdal has pointed out, the radicalism of their ideas as to economic reorganization was tempered by the conservatism of other facets of their thought, 7 but this does not vitiate the real character of their economic policy, namely, a theory of how the economy should be organized and controlled, and how such should be brought about. Moreover, their naturalism can be reduced to the hypothesis and advocacy of a particular system in terms of the ethical “ought,” the “ideal” becoming in their system the “natural,” the acceptance of which was argued on both mandatory and utilitarian grounds. 8
6. Ibid., p. 61; see also Schumpeter, History of Economic Analysis (NewYork: Oxford University Press, 1954), p. 230.
7. Gunnar Myrdal, The Political Element in the Development of Economic Theory (Cambridge: Harvard University Press, 1955), p. 31, “...the formulation of normative rules was for them one of the central functions of theoretical analysis. This explains why they attempted no demarcation of their science from rational politics.” (p.6)
8. While “The philosophy of the natural order presumed that the economic institutions essential to society existed from the beginning as given data or developed spontaneously without the exertion of pressure by the state,” Usher argues that this position “was due to concentration of attention upon the ultimate fact of economic adjustment rather than to any failure to recognize the magnitude of the obstacles encountered in the development of the institutional mechanisms of social life.” “Thus liberal” economists made substantial contributions to state policy designed to develop or modify private institutions essential to economic activity.” (Op. cit., p. 407) Hence”.. . their ordre naturel was no more than a
[directive principle for the regulation of industry and agriculture by a supposedly all-powerful and omniscient government. Quesnay’s Maximes were intended to provide such a government with the viewpoints needed to translate into practical policy the principles of the Tableau on the basis of statistical data which he offered to have furnished periodically. The idea of a self-perpetuating system of markets had never as much as entered his mind.” (Karl Polanyi, The Great Transformation (New York: Rinehart, 1944), p. 135.)
For similar interpretations of the significance of naturalism for the Physiocratic system see: Myrdal, op. cit., especially pp. 28-29, 5-6, 115; Schumpeter, Economic Doctrine and Method, op. cit., pp. 47-59; MacGregor, op. cit., p. 66; 0. H. Taylor, Economics and Liberalism (Cambridge: Harvard University Press, 1955), pp. 37-99, in particular pp. 47, 51, 85-88, 98-99; John R. Commons, Legal Foundations of Capitalism (New York: Macmillan, 1924), pp. 241-42, and Institutional Economics (New York: Macmillan, 1934), pp. 136-37; Neffi, op. cit., pp. 162, 168-73, and “The Physiocrate’ Concept of Economics,” this Journal, LXIII (Nov. 1949), in particular 551-53; James Bonar, Philosophy and Political Economy (New York: Macmillan, 1909), p. 194; John A. Mourant, “Mr. Neill and Physiocracy,” Journal of the History of Idea, X (Jan. 1949), 113; and H. W. Peck, Economic Thought and its Institutional Background (New York: Farrar and Rinehart, 1935), p. 65.] * HHC – [bracketed] section displayed on p. 149 of the original.
Physiocracy was not only Platonic in its theory of knowledge as applied to action and change, but further would have directed the accomplishment of such change through the agency of the political state. So far from calling for abstinence on the part of the state, and a departure from Colbertism, the Physiocrats would have used the state to accomplish their own particular reorganization and redirection of the economy. It is one thing to denigrate the present system, call for its cessation through voluntary abdication by government from past policies and the abstinence from adopting any new state program save abstinence itself, and at the same time seek the free, voluntary and uncontrolled reorganization of the economy through a spontaneous emergence. But it is quite something else to call for the substitution of one system of activist policy for another, and moreover, as will be seen, one also involving continuing supervision by the state. What Physiocracy would have accomplished was the substitution of their own program of agriculturalism for that of Colbertism; i.e., of their aims, their policies and their organization of the economy, for the aims, policies and organization of the economy of the Ancien Régime. Smith, notwithstanding his praise, also recognized that Physiocracy was a system no less than was mercantiism, that Physiocracy simply would have changed the structure and orientation of state policy rather than adopting the principle of having no state policy of restraint and promotion, or what Smith called “the simple and obvious system of natural liberty.” 9
9. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Modern Library, 1937), pp. 650-61.
The first function, then, of the Physiocratic theory of economic policy is the enactment of the Physiocratic program of reconstruction of an agricultural kingdom by the political state.
The Physiocratic theory of economic policy is thus founded upon not only a theory of socio-economic change but also a theory of the exercise of social control by the state. The Physiocrats recognized that the fact of social existence, of society itself, required a system of social control; that, further, the state is an instrument of social control; and that the practice of social control by the state extends over the domain of the choice, organization and control of the economy. Moreover, the Physiocrats recognized that since the economy is or may be controlled by the state, the theory of economic policy employed by the state governs the organization of the economy. Thus aware that to control the state is to control economic policy, the Physiocrats’ aim was to secure adoption of their particular theory of policy and program by the sovereign, to whom their program of change was directed and through whom its realization was to be effectuated.
The Physiocrats tacitly rejected what generally came to be a central tenet of nineteenth century economic liberalism, namely, that the state is an actual and potential nemesis to the individual, that economic policy was to proceed from the maxim, “the least government the better.” On the contrary, the Physiocrats readily envisioned the utilization of the political state for the accomplishment of positive good, so that “From this point of view they would have rejected the ridiculous paradox of Bastiat that the State does harm even when it does good;…” 1 The Physiocrats saw that taxes were born out of their “very utility,” that the state itself constituted an agent of production, 2 and that since the state was axiomatically engaged in social control it was to be used as an agency for the realization of the national economy deemed most naturally essential and advantageous to political society. In thus regarding the state as a necessary and useful institution, the Physiocrats were at one with both the conservative Burke and later apostles of democratic reformism.
The Construction of an
1.Henry Higgs, The Physiocrats (New York: Langland Press, 1952), pp. 143-44.
2.Luigi Einaudi, “The Physiocratic Theory of Taxation,” in Economic Essays in Honor of Gustave Cassel (London: Allen and Unwin, 1933), pp. 129-42; discussed in Samuels, op. cit., pp. 106-7.
crats. 3 Their argument can be reduced to a simple syllogism, the phrases of which may be taken from Quesnay’s Maximes Générales du Gouvernement Economique d’un Royaume Agricole, the title of which is itself instructive. The reasoning postulates:
That the sovereign and the nation never forget that the land is the only source of wealth, and that it is agriculture which multiplies it.... From this plentiful source depends the success of all parts of the government of the kingdom.
That the economic government occupy itself only in favoring the productive outlays and the commerce of agricultural commodities, and that it leave alone the sterile outlays.
… the order of the government of an agricultural kingdom... must unite all interests to a main object, to the prosperity of agriculture, which is the source of all the wealth of the state and all its citizens. 4
Since agriculture is assumed as the source of prosperity (founded upon productivity), and since it is also assumed that the state is to promote prosperity (concentrating logically upon productivity), it follows that the state must promote agriculture and thus an agricultural kingdom.
It perhaps needs to be made clear that it would be erroneous to reduce Physiocratic policy to the simple formulation, “promote agriculture,” though such was in fact required. What is involved is much broader, for the reconstruction necessary to effectuate the agricultural kingdom would have extended to the basic institutional foundations of the greater society itself. But it does follow that to argue the adoption of an agricultural society is to elevate the interests of the agricultural classes (those deriving their income and status from agriculture and land), which must mean, given the system advocated by Quesnay, the promotion of the interests of the landowner, “for, in preference to all, THE KINGDOM MUST BE WELL PEOPLED BY RICH FARMERS.” 5
The Reorganization and Redirection of the State: The construction of the agricultural kingdom through the agency of the state required, in the minds of the Physiocrats, the reorganization and redirection of the state itself so as to facilitate the realization of their objective. This alteration of state power involved a reconstitution of the decision-making structure of the state and a change in the focus and conduct of state affairs. In both respects the changes Physiocracy would have wrought would have been a substantial departure from
3. Except for Turgot, for whom the foundations of the new order would have been broader based, as that of Quesnay might have become had he the opportunity to formulate actual public policy.
4. Oncken, op. cit., pp. 330, 333.
5.Ibid., p. 333.
the hierarchy of policy criteria governing the
organization and conduct of such policy under the Ancien Régime. The specific changes are the
Physiocrats’ solutions to problems then contemporary in
The problems of contemporary France as perceived by the Physiocrats included: (a) the practice of Colbertism, meaning Colbertism pur, whereby agriculture was disadvantaged in the interests of the development of national industry in the pursuit of favorable trade balances; two prostitutions of Colbertism pur, namely, (b) the refocusing of national economic policy from the objective of a favorable trade balance (and thereby economic development and national strength) to the support of the treasury (i.e., the profligate monarch’s imperial and courtly expenditures), and (c) the exploitation and manipulation of government policy for the private pecuniary advantage of those in and out of public office;’ (d) the internal protection system, resulting from the dual policies of local governments to secure and protect both the locally produced necessities for the local population and the local market for locally produced goods and services; and (e) the social and political division of the French nation, coupled with and manifest in the juridical diversity of the several parts of the nation, and the resultant mutual distrust and hostility.
To the Physiocrats, all of the foregoing was anathema, and for each the Physiocrats had a solution. In the article “Grains,” Quesnay laid down a basic principle of policy: “The government of the incomes of the nation must not be abandoned to the discretion or authority of the minor administration and private individuals.” Internal protectionism and Colbertism, both pure and impure, were to be abrogated. Physiocratic economic policy would assume the tasks of:
… suppressing the prohibition and prejudicial impediments to the internal commerce and reciprocal external commerce.
abolishing or moderating the excessive rights of rivers and tolls which destroy the incomes of the distant provinces where the commodities can be commercial only by long transports;...
It is no less necessary to abolish the special privileges of the provinces, towns and communities for their particular advantages.
6. Max Weber described as “political capitalism” or “fiscal capitalism” the economy wherein profit opportunities accrue from the exploitation of political prerogatives. From Max Weber: Essays in Sociology, H. H. Gerth and C. Wright Mills, eds. (New York: Oxford University Press, 1946), pp. 66-87; see also Max Weber: The Theory of Social and Economic Organization, ed. Talcott Parsons (New York: Oxford University Press, 1947), pp. 278-80.
It is important also to facilitate everywhere the communications and the transports of merchandise by repairing roads and navigation of rivers.
It is moreover essential not to subjugate the commerce of the commodities of the provinces in the prohibitions and permissions shortlived and arbitrary which ruin the countryside under the heady pretext of assuring the abundance in the towns...
One must not restrict at all the exportation of grains to some particular provinces because they become exhausted before the other provinces can regarnish them; and the inhabitants can be exposed, during many months, to a scarcity which they attribute with reason to exportation.
But when the freedom of exportation is general, the raising of grains is not susceptible because the merchants draw from all parts of the kingdom, above all from the provinces where the price of grain is low.
The basic ideas are reiterated in the Maximes Générales.
A second basic principle was placed at the beginning of the Maximes Genérales:
That the sovereign authority be single and superior to all the individuals of society and to all the unjust enterprises of special interests; for the object of rule and obedience is the security of all and the lawful interest of all. The system of checks and balances (counterforces) in government is a harmful one which only produces discord among the great and the oppression of the weak. The division of society into various orders of citizens, whereof some exercise sovereign authority over others, is detrimental to the general interest and introduces the dissention of special interests among the various classes of citizens: this division reverses the order of the government of an agricultural kingdom which must unite all interests to a main object, to the prosperity of agriculture, which is the source of all the wealth of the state and all its citizens. 7
In the words of Turgot, there should be “a paternal government, based on a national constitution whereby the monarchy is raised above all in order to assure the welfare of all;…” Thus, “The edicts were calculated partly to restore the monarchy to the de facto head of the State, re-exalted the hearts of the people, and made free the parasites which were fattening from its already over-weakened vitality, and set forward to impartial government of all the subjects.” 8 The “liberty of the king’s subjects,” as Turgot put it, was not to be sacrificed “to the exactions and caprices of private interests.” 9 Quesnay thus devotes the final three Maximes to the subject of financial reform. 1
7. Oncken, op. cit., pp. 241-42, 331; see also Mazimes XVI, XVII, XXV.
8. R. P. Shepherd, Turgot and the Six Edicts (New York: Columbia University, Series in History, Economics and Public Law, Vol. XVIII, No. 2, 1903), pp. 103, 61; see also pp. 138, 37-42, and Stephens, op. cit., pp. 267-68, 245-46, 240-41.
9.Stephens, op. cit., p. 45.
1.Oncken, op. cit., pp. 337-38.
These Physiocratic solutions in their entirety would
have reconstructed the political economy of
It is clear, then, that “The physiocrats… do not call forth a contrast between state and society; they inquire into the reasons which cause the flourishing or the decadence of both at the same time. The celebrated words of Dupont are the most fitting that can be given of the physiocratic doctrine: ‘...Pauvres paysans; pauvre royaume. Pauvre royaume; pauvre souverain.’ 3 Like the Marxists of a century later the Physiocrats were convinced of the validity of their ideas and program. What was necessary then was to secure an efficient system of political economy capable of effectuating their program. “Monarchy justified by expedience” 4 served the purpose well. Yet, in a broader context, the Physiocrats reflect the ascend-
2. Physiocratic political theory incorporated several checks, or “guarantees,” upon the sovereign power; see Mario Einaudi, The Physiocratic Doctrine of Judicial Control (Cambridge: Harvard University Press, 1938).
3. Ibid., p. 25.
4. C. Northcote Parkinson, The Evolution of Political Thought (Boston: Houghton Mifflin, 1958). See also Alexis de Tocqueville, The Old Regime and the French Revolution (Garden City: Doubleday Anchor, 1955), pp. 164-65.
ancy of the nation-state as the dominant formal institution for social control and social change.
As part of their general economic theory, the Physiocrats had a systematic model of economic development the central focus of which was the flow of adequate resources to agriculture. The securing of economic development (defined in terms of agriculture) thus became the second major function of government in the Physiocratic theory of economic policy.
The promotion or protection of adequate agricultural resources may be defined in terms of the bon prix: “The principal function of adequate trade consists in the encouragement of profitable agricultural activity by providing a large salesmarket and a high and stable price for its products.” 5 Or it may be thought of in terms of a proper pattern of spending: “It is... upon the continuity of this circulation and upon the pattern of national expenditure or consumption (i.e., distribution of expenditures between the sterile and productive classes) that, in physiocratic theory, economic health, prosperity, and progress depend.” “Consumption and expenditure must be according to pattern... 6 In either case, the Physiocratic theory of economic policy included as a basic proposition that:
The government’s efforts must be directed towards the encouragement of all expenditures which tend to maintain the high price of agricultural products and ensure a sufficient effective demand to cover the supply of these goods.7
One has but to cite Maxime VIII and the validity of the present function is clear:
That the economic government occupy itself only in favoring the productive outlays and the commerce of agricultural commodities, and that it leave alone the sterile outlays.
And two other Maximes deal with the same principle. 8
The matter is even clearer when the negative side is examined. If it is true that “Prudent or ‘productive’ consumption is one of the major prescriptions for policy…”, 9 then it is also true that unproductive consumption is one of the major proscriptions of policy. Witness, then, Maximes IX and XXII:
5. Henry Woog, The Tableau Economique of Francois Quesnay (Bern: A.Francke, 1950), p. 28; see also p. 86.
6. J. J. Spongier, “The Physiocrats and Say’s Law of Markets,” I-II, Journal of Political Economy, LIII (Sept. and Dec. 1945), 204, 205.
7. Woog, op. cit., p. 89.
8. Oncken, op. cit., pp. 335, 336, Maximes XX and XXVII.
9. Harold G. Vatter, “The Physiocrats and the Growth of Underdeveloped Economies,” Current Economic Comment, Vol. 18 (Nov. 1956), p. 40.
That a nation which has a large territory to cultivate and the facility of exercising a large commerce in agricultural commodities not extend too much employment of money and men to manufactures and luxury commerce, to the detriment of the work and outlays of agriculture; for, in preference to all, THE KINGDOM MUST BE WELL PEOPLED BY RICH FARMERS.
That one not promote the luxury of ornamentation to the detriment of the expenses of the exploitation and improvement of agriculture and the expenses of consumption of subsistence, which maintains the good price and the sale of local agricultural commodities and the reproduction of the nation’s income. 1
But of all the facets of public policy relating to the promotion and protection of economic development, “the strategic one to Quesnay was the protection of the funds (in real terms) properly destined for replacement and accumulation of fixed and working capital.” 2 To this matter Quesnay devoted no less than three Maximes. 3
In the present age, when agricultural economic policy has apparently reached its zenith (or nadir), the meaning of all this is quite clear, notwithstanding the fact that the Physiocrats (save for Turgot) had no opportunity in France to spell out the particulars of the various general policy prescriptions. But it has long been clear that Physiocratic proposals for tax and monetary reform had as one of their objectives the reduction of burdens upon the advances and thus upon productivity. And it is also true that the purpose of interest rate regulation for several of the Physiocrats was to facilitate the movement of capital to agriculture. Moreover, not only was government to promote and protect the flow of capital to agriculture, but government was also specifically to promote the grande culture. Thus the government should help promote “That the children of wealthy farmers establish themselves in the country for perpetuating the labor supply there,” but primarily because “it is less men than wealth that one must attract into the country” to establish the grande culture. While “One ought not favor the monopoly of the cultivation of landed properties for it is detrimental to the general income of the nation,” said Quesnay, it is nonetheless incumbent upon government to provide “That the lands employed in the cultivation of grains be combined, as much as possible into large farms exploited by rich farmers...” 4 Government participation, promotion and supervision
1. Oncken, op. cit., pp. 333, 335; see also Vatter, ibid., pp. 39-40; Woog, op. cit., pp. 84 ff.; Spongier, op. cit., pp. 208ff.; and Leo Rogin, The Meaning and Validity of Economic Theory (New York: Harper, 1956), p. 32.
2. Vatter, op. cit., p. 39.
3. Oncken, op. cit., pp. 332, 333, Maximes V, VI and XII. See also Woog, op.cit., p. 92; and Spongier, op. cit.
4. Oncken, op. cit., pp. 333, 334.
was thus included by the Physiocrats in their theory of economic development.
But it is here also that the principle of the freedom of commercial intercourse belongs, though as a practical maxim postulating substantial freedom to the particulars of economic life and not as dogma or doctrine. As with Adam Smith, so also with the Physiocrats: economic development - the maximization of the net product - was in part contingent upon substantial economic liberty.
That one not hinder at all the foreign commerce in local commodities; for SUCH IS THE SALE, SUCH IS THE REPRODUCTION. 5
But what “substantial economic liberty” meant for the Physiocrats is clearly no blanket prescription against any positive and activist role of government in the economy, but rather freedom in the sundry particulars of economic life, and these only given (a) the consonance thereof with the economic development of the agricultural kingdom and (b) the exercise of government authority promotive of the agricultural kingdom.
“substantial economic liberty” must be taken to mean, then, are the
down-to-earth particulars of (a) substantial freedom in the utilization of
privately owned resources, including the freedom of cultivation and the
employment of capital, “the easiness and choice of expenditure,”6 and
the freedom of occupations;7 and (b) substantial freedom in the
buying and selling and transport of commodities. These were the matters that were
impeded, prohibited or regulated by both Colbertism, pure and impure, and local
protectionism; these were the matters in which the Physiocrats generally would
have let spontaneity govern - and they involve substantial freedom for the
individual in his economic pursuits. It is laissez faire, laissez passer, meaning thereby freedom to do,
or freedom to make, and freedom to pass; or, as
Laissez faire did not imply that Government should abstain inertly
from constructive work: it meant simply that anyone who thought that he could
make anything with advantage, whether on old lines or by a new method, should be
at liberty to do so. Laissez
passer had its chief application to difficulties that did not exist in
5. Ibid., p. 334.
6. Ibid., pp. 240-41; see also Maxime XIII (p. 333).
7. Shepherd, op. cit., p. 119.
8. Alfred Marshall, Industry and Trade (3d ad.;
Such constructive work would take the form of the several functions attributed to government as developed in these pages. Moreover, Quesnay’s twenty-fifth Maxime, “That there be maintained the complete freedom of commerce;…” did not preclude the principle that all behavior would have to be consonant with the operation of the agricultural system. Thus the “complete freedom of commerce” is modified by such Maximes as those which provide:
THAT A PART OF THE SUM OF INCOMES NOT PASS TO A FOREIGN COUNTRY WITHOUT RETURNING, IN MONEY OR IN MERCHANDISE.
THAT THEY PREVENT (EVITE) THE DESERTION OF HABITANTS WHO WOULD CARRY THEIR WEALTH OUT OF THE KINGDOM.
and that there be no social loss in foreign trade. 9 The exercise of private freedom was contingent upon the essentially collectivist criterion of the effect upon the agricultural system. Private vices were not always public virtues, nor were private virtues always public virtues.
Laissez faire, laissez passer thus had an important role in the Physiocratic theory of economic policy: what the neoclassical economist calls resource allocation was to be achieved substantially through the operation of substantial economic liberty, given the caveats noted above, namely, the consonance thereof with the agricultural system, and government policy demonstrably activist in other respects. But laissez faire, laissez passer is not the sum total of the Physiocratic theory of economic policy; for clearly the Physiocratic concept of the role of government in the economy was not one of sitting back and relaxing and letting the world and the economy go by on its own. Individuals were to have greater latitude of action than under the Ancien Régime, but they were still to operate. within the social controls of a Royaume Agricole. Nor, as Smith himself pointed out, is the Physiocratic theory of economy policy, interpreted as laissez faire, that of Adam Smith. It is now well recognized that Smith’s theory of economic policy has no insignificant place for government, though such was not emphasized. In comparison therewith, however, the position here is that in the Physiocratic theory of economic policy, (1) government had a more thorough and activist role, being given specific positive tasks and ends, and (2) laissez faire, as defined above, had a restricted scope. Smith would rely largely upon the free market for the direction and course of economic development; the Physiocrats would have adopted some form of what now would be called target planning (and balance planning - see the following section) to
9. Oncken, op cit., 333, 336.
govern the form of economic organization and economic behavior in general. The Physiocrats would have influenced the allocation of resources directly, as they deemed necessary; and, moreover, pervasively, by controlling the particular institutional environment within which resource allocation takes place, to wit, so as to direct resources to agriculture - neither of which is Smithian. The free market of Smith was relatively spontaneous, autonomous and viable; that of the Physiocrats would not be the opposite but it would be a manipulated economy. To Smith, government had positive tasks but was to be relatively passive insofar as resource allocation and economic development were concerned; to the Physiocrats, government was to supervise actively the performance of the economy (thus antedating contemporary programs of economic development).
Correlative to the. role of government in securing economic development was a solicitude shared by several Physiocrats over the stability of growth. These writers were concerned over obstacles that might impede the process of expansion once the agricultural system had already become a fait accompli. As Spengler put it, Quesnay discovered “that economic relations are resolvable into a circular flow, whose continuity is contingent upon the presence of certain conditions.” 1 Interruption might result from two types of circumstances: first, the proper pattern of spending might not be achieved, with an adverse effect upon the sale of agricultural commodities and agricultural income and investment, the total volume of spending, ceteris paribus, remaining unchanged; and second, the maximization of the net product might not be realized due to an inadequate volume of spending per se, with a similar contracting effect. 2
Since growth could be impeded whenever there did not exist the required pattern or volume of expenditures, the Physiocratic theory of economic policy therefore also was concerned with promoting and protecting those necessary conditions. Since “...they did infer, in consequence of their peculiar theory of production, that an economy might be in equilibrium either at a prosperity or at a depression level,” several Physiocrats contemplated the exercise of
1. Spengler, op. cit., p. 347.
2. Spengler, ibid.; see also Woog, op. cit., p. 83 if., and Ronald L. Meek, “The Interpretation of the Tableau Economique”; Economica, N.S. XXVII (Nov. 1960), 336-47.
3. Spengler, ibid., p. 327; see also p. 326.
government policy (monetary, fiscal and trade) vis-à-vis conditions of instability. While once again the particulars of policy never had occasion to be fully developed, and while there is some question as to how far several of the Physiocrats would have gone, 4 there is ample explicit evidence, as indicated in the author’s earlier article, to indicate that Quesnay and several other Physiocrats would have clearly favored governmental supervision of the performance of the economy in this respect as in others.
The securing of the stability of economic development thus becomes the third general function of government in the Physiocratic system.
The reformulation of the Physiocratic theory of economic
policy that forms the thesis of this article cannot be proven: for all the
passages either esoteric or mundane extolling the glories of the abstinence of
civil government, of the pervasive existence of liberté, there are
equally strong exclamations in support of what the Physiocrats called
autorité tutelaire. The
positivist position has been taken here that what counts is what their policy
really amounted to, rather than the doctrinaire statements one way or the other.
But fundamentally the matter cannot
be settled with any great finality because no Physiocratic régime came to
Moreover, the supposed paradox of economic freedom and political absolutism cannot be resolved by stating that, “What they wanted to see was the minimum of legislation with a maximum of authority.” After all, the relevant index is not the length or weight of the statute book but rather the character and extent of the role of
4. Spengler, ibid., pp. 328-29; Samuels, op. cit., p. 104, note 4.
government, i.e., the realm and exercise of its authority. The paradox is only a paradox as long as the Physiocrats are defined as nineteenth century economic liberals - which they were not, though laissez faire had a place in their theory of economic policy. Nor can it be argued that, “It was just the sovereignty of the ‘natural order’ - nothing more.” 5 There seems to be a choice of proffered natural orders, the selection and adoption of which is a matter of discretion, i.e., of policy. The fact of the language of naturalism does not preclude the foregoing analysis from being policy; in spite of all their naturalism, the Physiocrats were essentially Platonic. The naturalist interpretation “. . . fails to grasp the fundamentally reformist character of their teaching and does injustice to their doctrine of economic policy.”
Whitehead has stated that, “The conduct of human affairs is entirely dominated by our recognition of foresight determining purpose, and purpose issuing in conduct. 7 The Physiocrats did not achieve the level of “conduct”; but they had “purpose,” and their purpose may be crystallized in terms of what they would have done had the opportunity for conduct arisen. That part of “what they would have done” relevant to the organization and control of the economy becomes their theory of economic policy. It is the effective basis of this program for the realization of purpose that this article has endeavored to delineate.
The Physiocratic theory of economic policy is fundamentally related to a theory of property:state relations in which private property is the dominant institutional form but wherein the public interest is manifest in the continuing modification or reconstitution of the bundle of rights that comprise private property at any given time.
The theory of economic policy operationally extant in the writings and beliefs of the Physiocrats encompassed the three paramount functions 8 of government defined above: (a) the conduct of socio-
5. Gide and Rist, op. cit., pp. 34, 35.
6. George J. Malanoe, “The Evolution of
the General Theory,” unpublished Ph.D. thesis,
7. Alfred North Whitehead, The Function of Reason (Boston: Beacon Press, 1958), p. 13.
8. Two other functions may also be identified, functions mundane but hardly unimportant. These may be called the protective and welfare functions. Both may be clarified as derivative of the police power as conventionally understood. The protective function relates to the securing of person and property against domestic and foreign sources of illegal infringement. (See Samuels, op. cit., pp. 96-97.) While all Physiocratic theory and each function of government relates to welfare, the welfare function narrowly defined is basically remedial, as indicated by Turgot’s program for famine relief. (Samuels, op. cit., pp. 101-2.)
economic change, i.e., the construction of the institutions of an agricultural system; (b) the support of economic development under the new system; and (c) the protection against obstacles to stability of growth. The Physiocratic theory of economic policy is thus far more complex than can be summarized by the term laissez faire (or laissez faire, laissez passer). If the term be defined broadly - as proscribing or minimizing government activity writ large - then it is patently fallacious and invalid. If it be defined narrowly - substantial freedom for resource allocation, involving wide personal latitude in economic affairs - then it is an incomplete statement of Physiocratic economic policy, for government had positive roles to play over and above - though not independent of - private behavior. 9 As Randall put it, “This dual demand for protection in fundamentals and freedom in all else is the controlling principle in the development of the science of political economy.” 1 Doctrine should not obscure the exercise of social control by the Physiocratic state, nor their coming to grips with the problem of securing change in an orderly manner. Nor is it tenable that such social control was of the “minimal” variety, meaning a real modicum of government authority and activity; minimal “given the system” is logically correct, but takes rather much for granted, begging the question of “the system.” To paraphrase J. M. Clark, “we must take some pains to avoid the implication that economy exists first and is then controlled. Control is rather an integral part of economy, without which it could not be economy at all. The one implies the other, and the two have grown together.” 2 Thus did the Physiocrats implicitly recognize that the basic economic institutions (the organization of economy) are legal in character; that law is an instrument for the attainment of economic objectives and that economy is an object of legal control.
9. Thus if one defines laissez faire “to embrace the arguments of those who accepted government as a necessity but nevertheless wished to see its functions reduced to the narrowest possible limits,” and of those who “recognized that government must protect life and property and must provide a few common services, such as education, but essentially... viewed the state in negative terms and were loath to have it assume positive duties in the interest of the general welfare,” then the Physiocrats would appear to belong more properly among “The theorists of the general-welfare state,... (who) believed that the state could benefit society by a positive exertion of its powers and that it should therefore act whenever its interposition seemed likely to promote the common well-being.” Sidney Fine, Laissez Faire and the General-Welfare State (Ann Arbor: The University of Michigan Press, 1956), p. vii.
1. J. H. Randall, Jr., The Making of the Modern Mind (Boston: Houghton Muffin, 1926), p. 322.
2. J. M. Clark, Social Control of Business (New York: McGraw-Hill, 1939), p. 12.