Physiocrats

Net Product

The crux of the Physiocratic doctrine was the notion that only agriculture yielded a surplus, which it called a produit net (net product). Physiocrats attacked monopolies, exclusive corporations, vexatious taxes, and various other abuses that had grown up under the mercantile system. Manufacturing, the Physiocrats argued, does not create net product since it uses as much value as inputs into production as it created in output.

Unlike the mercantilists, who believed that the wealth of a nation lies in its stocks of gold and silver, Physiocrats insisted that the real wealth of a nation is [Page 826]exemplified by the size of its net product. They, however, did oppose commerce and manufacturing, and questioned government policies that distorted the entire economy with protective tariffs, controls, and various monopolies, none of which created net product. Physiocrats insisted that the principal aim of government policy should be maximizing the value and output of the agricultural sector. In the specific circumstances of 18th-century France, that implied the removal of restrictions of internal movements of goods and labor, removal of state monopolies, and embracing the laissez-faire attitude.

Quesnay derived his laissez-faire doctrine by modifying the natural rights theory prevalent in the 18th-cen-tury literature and gave it an optimistic interpretation. He distinguished between the natural order created by God (ordre naturel) and the man-made positive order (ordre positif) and asserted that man does not give up any natural rights by entering society. For the natural order, Physiocrats identified three classes: the productive class (agricultural laborers and farmers who cultivate the soil and pay a rent to the landed proprietors), the sterile class (classe stérile; industrial laborers, artisans, and merchants who produce no surplus), and the proprietor class (classe disponible, who appropriated the net product as rents).

Incomes flowed among sectors and, consequently, from class to class. A natural state of the economy is achieved when income flows do not cause the expansion of one sector and contraction of others. The natural state implies a balance and when achieved, the economy reproduces itself indefinitely. According to Quesnay, economic evils originate from restrictions generated by the positive order, since these disturb the harmony in the natural order. Consequently the best government is the one that governs the least. Similarly the Physiocrats were against a complex tax scheme that might distort the economy and cause poverty. They advocated the single tax on landed property.

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