The French Physiocrats
Epigraphs to Book II
Definitions are the basis of systematic reasoning.
The mixture of those things by speech which are by nature divided is the mother of all error.
Bacon made us sensible of the emptiness of the Aristotelian philosophy; Smith, in like manner, caused us to perceive the fallaciousness of all the previous systems of political economy; but the latter no more raised the superstructure of this science, than the former created logic.... We are, however, not yet in possession of an established text-book on the science of political economy, in which the fruits of an enlarged and accurate observation are referred to general principles that can be admitted by every reflecting mind; a work in which these results are so complete and well arranged as to afford to each other mutual support, and that many everywhere and at all times be studied with advantage.
-- J.B. Say, 1803
We may cite as examples of such inchoate but yet incomplete discoveries the great Wealth of Nations by Adam Smith -- a work which still stands out, and will ever stand out, as that of a pioneer, and the only book on political economy which displays its genius to every kind of intelligent reader. But among the specialists and the schools, this work of genius which swayed all Europe in its day, is laid upon the shelf as an antiquated affair, superseded by the smaller and duller men who have pulled his system to pieces and are offering us the fragments as a science most of whose first principles are still under dispute.
-- Professor (Greek) J.P. Mahaffy, "The Present Position of Egyptology," "Nineteenth Century," August, 1894.
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The Science of Political Economy
Book II, The Nature of Wealth
The French Physiocrats
Showing Who the First Developers of a True Science of Political Economy Were, and What They Held
Quesnay and his followers -- The great truths they grasped and the cause of the confusion into which they fell -- This used to discredit their whole system, but not really vital -- They were real free traders -- The scant justice yet done them -- Reference to them in Progress and Poverty -- Macleod's statement of their doctrine of natural order -- Their conception of wealth -- Their day of hope and their fall
The first developers in modern times of something like a true science of political economy, or, rather (since social truths, though they may be covered up and for a while ignored, must since the origin of human society always have been here to be seen), the men who first got a hearing large enough and wide enough to bring down their names and their teachings to our times, were the French philosophers whom Adam Smith speaks of in the sentence before quoted, as the sect who "all follow implicitly, and without any sensible variation, the doctrines of Mr. Quesnai."
François Quesnai, or Quesnay, as the name is now usually spelled, a French philosopher, who, as McCulloch says, was "equally distinguished for the subtlety and originality of his understanding and the integrity and simplicity of his character," was born June 4, 1694, twenty-eight years before Adam Smith, at Mercy, some ten leagues from Paris. Beginning life in the manual labor of the farm, he was without either the advantages or, as they often prove to men of parts, the disadvantages of a scholastic education. With much effort he taught himself to read, became apprentice to a surgeon, and at length began practice for himself at Mantes, where he acquired some means and came to the knowledge of Marshal de Noailles, who spoke of him to the queen, who in her turn recommended him to the king. He finally settled in Paris, bought the place of physician to the king, and was made by the monarch his first physician. Abstaining from the intrigues of the court, he won the sincere respect of Louis XV, with whom as his first physician he was brought into close personal contact. The king made him a noble, gave him a coat of arms, assigned him apartments in the palace, calling him affectionately his thinker, and had his books printed in the royal printing-office. And around him, in his apartments in the palace of Versailles, this "King's Thinker" was accustomed to gather a group of eminent men who joined him in an aim the grandest the human mind can entertain -- being nothing less than the establishment of liberty and the abolition of poverty among men, by the conformation of human laws to the natural order intended by the Creator.
These men saw what has often been forgotten amid the complexities of a high civilization, but is yet as clear as the sun at noonday to whoever considers first principles. They saw that there is but one source on which men can draw for all their material needs -- land; and that there is but one means by which land can be made to yield to their desires -- labor. All real wealth, they therefore saw, all that constitutes or can constitute any part of the wealth of society as a whole, or of the wealth of nations, is the result or product of the application of labor to land.
They had not only grasped this first principle -- from which any true economy, even that of a savage tribe or an isolated individual, must start -- but they had grasped the central principle of a true political economy. This is the principle that in the natural growth of the social organism into which men are integrated in society there is developed a fund which is the natural provision for the natural needs of that organism -- a fund which is not merely sufficient for all the material wants of society, and may be taken for that purpose, its intended destination, without depriving the unit of anything rightfully his; but which must be so taken to prevent the gravest injuries to individuals and the direst disasters to the state.
This fund Quesnay and his followers styled the produit net -- the net, or surplus, or remaining, product. They called it this, evidently because they saw it as something which remained, attached, as it were, to the control of land, after all the expenses of production that are resolvable into compensation for the exertion of individual labor are paid. What they really meant by the produit net, or net product, is precisely what is properly to be understood in English by the word "rent" when used in the special sense or technical meaning which it has acquired since Ricardo's time as a term of political economy. Net product is really a better term than rent, as not being so liable to confusion with a word in constant use in another sense; and John Stuart Mill, probably without thought of the Physiocrats, came very close to the perception that governed their choice of a term when he spoke of economic rent as "the unearned increment of land values."
That Quesnay and his associates saw the enormous significance of this "net product" or "unearned increment" for which our economic term is "rent," is clear from their practical proposition, the impôt unique, or single tax. By this they meant just what its modern advocates now mean by it -- the abolition of all taxes whatever on the making, the exchanging or the possession of wealth in any form, and the recourse for public revenues to economic rent; the net or surplus product; the (to the individual) unearned increment which attaches to land wherever in the progress of society any particular piece of land comes to afford to the user superior opportunities to those obtainable on land that any one is free to use.
In grasping the real meaning and intent of the net product, or economic rent, there was opened to the Physiocrats a true system of political economy -- a system of harmonious order and beneficent purpose. They had grasped the key without which no true science of political economy is possible, and from the refusal to accept which the scholastic economy that has succeeded Adam Smith is, after nearly a hundred years of cultivation, during which it has sunk into the contemptible position of "the dismal science," now slipping into confessed incompetency and rejection.
But misled by defective observation and a habit of thought that prevailed long after them, and indeed yet largely prevails (a matter to which I shall subsequently more fully allude), the Physiocrats failed to perceive that what they called the net or surplus product, and what we now call economic rent, or the unearned increment, may attach to land used for any purpose. Looking for some explanation in natural law of what was then doubtless generally assumed to be the fact, and of which I know of no clear contradiction until Progress and Poverty was written, that agriculture is the only occupation which yields to the landlord a net or surplus product, or unearned increment (rent), over and above the expenses of production, they not unnaturally under the circumstances hit upon a striking difference between agriculture, which grows things, and the mechanical and trading occupations, which merely change things in form, place or ownership, as furnishing the explanation for which they were in search. This difference lies in the use which agriculture makes of the generative or reproductive principle in nature.
This supposed fact, and what seemed to them the rational explanation of it, in the peculiar use made in agriculture of the principle of growth and reproduction which characterizes all forms of life, vegetable and animal, the Physiocrats expressed in their terminology by styling agriculture the only productive occupation. All other occupations, however useful, they regarded as sterile or barren, insomuch as under the fact assumed such occupations give rise to no net produce or unearned increment, merely returning again to the general fund of wealth, or gross product, the equivalent of what they had taken from it in changing the form, place or ownership of material things already in existence.
This was their great and fatal misapprehension, since it has been effectually used to discredit their whole system.
Still, it was not really a vital mistake. That is to say, it made no change in their practical proposals. The followers of Quesnay insisted that agriculture, in which they admitted fisheries and mines, was the only productive occupation, or in other words the only application of labor that added to the sum of wealth; while manufactures and exchange, though useful, were sterile, merely changing the form or place of wealth without adding to its sum. They, however, proposed no restrictions or disabilities whatever on the occupations they thus stigmatized. On the contrary they were -- what the so-called "English free traders" who have followed Adam Smith never yet have been -- free traders in the full sense of the term. In their practical proposition, the single tax, they proposed the only means by which the free trade principle can ever be carried to its logical conclusion -- the freedom not merely of trade, but of all other forms and modes of production, with full freedom of access to the natural element which is essential to all production. They were the authors of the motto that in the English use of the phrase "Laissez faire!" "Let things alone," has been so emasculated and perverted, but, which on their lips was, "Laissez faire, laissez aller," "Clear the ways and let things alone!" This is said to come from the cry that in medieval tournaments gave the signal for combat. The English motto which I take to come closest to the spirit of the French phrase is, "A fair field and no favor!"
It is for the reason that of all modern philosophers they not only were the first, but were really true free traders, that I dedicated to the memory of Quesnay and his fellows my Protection or Free Trade (1885), saying:
By thus carrying the inquiry beyond the point where Adam Smith and the writers who have followed him have stopped, I believe I have stripped the vexed tariff question of its greatest difficulties, and have cleared the way for the settlement of a dispute which otherwise might go on interminably. The conclusions thus reached raise the doctrine of free trade from the emasculated form in which it has been taught by the English economists to the fullness in which it was held by the predecessors of Adam Smith, those illustrious Frenchmen, with whom originated the motto "Laissez faire," and who, whatever may have been the confusions of their terminology or the faults of their method, grasped a central truth which free traders since their time have ignored.
These French "Economists," now more definitely known as Physiocrats, or single taxers, had got hold of what in its bearings on philosophy and politics is probably the greatest of truths; but had got hold of it through curiously distorted apprehensions. It was to them, however, like a rainbow seen through clouds. They did not see the full sweep of the majestic curve, and endeavored to piece out their lack of insight with a confused and confusing terminology. But what they did see showed them its trend, and they felt that natural laws could be trusted where attempts to order the world by human legislation would be certain to go astray.
Yet nothing better shows the importance of correct theory to the progress of truth against the resistance of powerful special interests than the complete overthrow of the Physiocrats. Their mistake in theory has sufficed to prevent, or perhaps rather to furnish a sufficient excuse to prevent the justice and expediency of their practical proposal from being considered.
I know of no English writer on the Physiocrats or their doctrines who seems to have understood them or to have had any glimmering that the truth which lay behind their theory that agriculture is the only productive occupation was an apprehension of what has since been known as the Ricardian doctrine of rent, carried out further than Ricardo carried it, to its logical results; but apprehended, as indeed Ricardo himself seems to have apprehended it, only in its relations to agriculture.
In Progress and Poverty, after working out what I believe to be the simple yet sovereign remedy for the continuance of wide-spread poverty amid material progress, I thus, in the chapter entitled "Indorsements and Objections" (Book VIII, Chapter IV), refer to the Physiocrats:
In fact, that rent should, both on grounds of expediency and justice, be the peculiar subject of taxation, is involved in the accepted doctrine of rent, and may be found in embryo in the works of all economists who have accepted the law of Ricardo. That these principles have not been pushed to their necessary conclusions, as I have pushed them, evidently arises from the indisposition to endanger or offend the enormous interest involved in private ownership in land, and from the false theories in regard to wages and the cause of poverty which have dominated economic thought.
But there has been a school of economists who plainly perceived, what is clear to the natural perceptions of men when uninfluenced by habit -- that the revenues of the common property, land, ought to be appropriated to the common service. The French Economists of the last century, headed by Quesnay and Turgot, proposed just what I have proposed, that all taxation should be abolished save a tax upon the value of land. As I am acquainted with the doctrines of Quesnay and his disciples only at second hand through the medium of the English writers, I am unable to say how far his peculiar ideas as to agriculture being the only productive avocation, etc., are erroneous apprehensions, or mere peculiarities of terminology. But of this I am certain from the proposition in which his theory culminated -- that he saw the fundamental relation between land and labor which has since been lost sight of, and that he arrived at practical truth, though, it may be, through a course of defectively expressed reasoning. The causes which leave in the hands of the landlord a "produce net" were by the Physiocrats no better explained than the suction of a pump was explained by the assumption that nature abhors a vacuum; but the fact in its practical relations to social economy was recognized, and the benefit which would result from the perfect freedom given to industry and trade by a substitution of a tax on rent for all the impositions which hamper and distort the application of labor, was doubtless as clearly seen by them as it is by me. One of the things most to be regretted about the French Revolution is that it overwhelmed the ideas of the Economists, just as they were gaining strength among the thinking classes, and were apparently about to influence fiscal legislation.
Without knowing anything of Quesnay or his doctrines, I have reached the same practical conclusion by a route which cannot be disputed, and have based it on grounds which cannot be questioned by the accepted political economy.
The best English account of the Physiocratic views that I now know of is that given by Henry Dunning Macleod, in his Elements of Economics (1881). He seems to have no notion of the truth that lay at the bottom of a mistake that has caused their great services to be all but forgotten, and which I shall take opportunity in a subsequent book more fully to explain. To him it is "simply incomprehensible how men of the ability of the Physiocrats could maintain that a country could not be enriched by the labor of artisans and by commerce." This he styles "one of those aberrations of the human intellect which we can only wonder at and not explain." But nevertheless he awards them the honor of being the founders of the science of political economy, declares that in spite of their errors "they are entitled to imperishable glory in the history of mankind," and gives in his own language an outline of their doctrine, from which (Book I, Chapter V, Sec. 3) I take the following:
The Creator has placed man upon the earth with the evident intention that the race should prosper, and there are certain physical and moral laws which conduce in the highest degree to ensure his preservation, increase, well-being, and improvement. The correlation between these physical and moral laws is so close that if either be misunderstood, through ignorance or passion, the others are also. Physical nature, or matter, bears to mankind very much the relation which the body does to the soul. Hence the perpetual and necessary relation of physical and moral good and evil on each other.
Natural justice is the conformity of human laws and actions to natural order, and this collection of physical and moral laws existed before any positive institutions among men. And while their observance produces the highest degree of prosperity and well-being among men, the non-observance or transgression of them is the cause of the extensive physical evils which afflict mankind.
If such a natural law exists, our intellegence is capable of understanding it; for, if not, it would be useless, and the sagacity of the Creator would be at fault. As, therefore, these laws are instituted by the Supreme Being, all men and all states ought to be governed by them. They are immutable and irrefragable, and the best possible laws: therefore necessarily the basis of the most perfect government, and the fundamental rule of all positive laws, which are only for the purpose of upholding natural order, evidently the most advantageous for the human race.
The evident object of the Creator being the preservation, the increase, the well-being, and the improvement of the race, man necessarily received from his origin not only intelligence, but instincts conformable to that end. Every one feels himself endowed with the triple instincts of well-being, sociability, and justice. He understands that the isolation of the brute is not suitable to his double nature, and that his physical and moral wants urge him to live in the society of his equals in a state of peace, good-will, and concord.
He also recognizes that other men, having the same wants as himself, cannot have less rights than himself, and therefore he is bound to respect this right, so that other men may observe a similar obligation towards him.
These ideas -- the product of reason, the necessity of work, the necessity of society, and the necessity of justice -- imply three others -- liberty, property, and authority, which are the three essential terms of all social order.
How could man understand the necessity of labor to obey the irresistible instinct of his preservation and well-being, without conceiving at the same time that the instrument of labor, the physical and intellectual qualities with which he is endowed by nature, belongs to him exclusively, without perceiving that he is master and the absolute proprietor of his person, that he is born and should remain free?
But the idea of liberty cannot spring up in the mind without associating with it that of property, in the absence of which the first would only represent an illusory right, without an object. The freedom the individual has of acquiring useful things by labor supposes necessarily that of preserving them, of enjoying them, and of disposing of them without reserve, and also of bequeathing them to his family, who prolong his existence indefinitely. Thus liberty conceived in this manner becomes property, which may be conceived in two aspects as it regards movable goods on the earth, which is the source from which labor ought to draw them.
At first property was principally movable; but when the cultivation of the earth was necessary for the preservation, increase, and improvement of the race, individual appropriation of the soil became necessary, because no other system is so proper to draw from the earth all the mass of utilities it can produce; and, secondly, because the collective constitution of property would have produced many inconveniences as to sharing of the fruits, which would not arise from the division of the land, by which the rights of each are fixed in a clear and definite manner. Property in land, therefore, is the necessary and legitimate consequence of personal and movable property. Every man has, then, centered in him by the laws of Providence, certain rights and duties; the right of enjoying himself to the utmost of his capacity, and the duty of respecting similar rights in others. The perfect respect and protection of reciprocal rights and duties conduces to production in the highest degree, and the obtaining the greatest amount of physical enjoyments.
The Physiocrats, then, placed absolute freedom, or property -- as the fundamental right of man -- freedom of Person, freedom of Opinion, and freedom of Contract, or Exchange; and the violation of these as contrary to the law of Providence, and therefore the cause of all evil to man. Quesnay's first publication, Le Droit Naturel, contains an inquiry into these natural rights; and he afterwards, in another called General Maxims of the Economical Government of an Agricultural Kingdom, endeavored to lay down in a series of thirty maxims, or fundamental general principles, the whole bases of the economy of society. The 23d of these declares that a nation suffers no loss by trading with foreigners. The 24th declares the fallacy of the doctrine of the balance of trade. The 25th says: "Let entire freedom of commerce be maintained, for the regulation of commerce, both internal and external, the most sure, the most true, the most profitable to the nation and to the state, exists in entire freedom of competition." In these three maxims, which Quesnay and his followers developed, was contained the entire overthrow of the existing system of Political Economy; and notwithstanding certain errors and shortcomings, they are unquestionably entitled to be considered as the founders of the science of Political Economy.
Wealth, in the economic sense of the wealth of societies, or the wealth of nations, Macleod goes on to state, the Physiocrats held to consist exclusively of material things, drawn from land -- to man the source of all material things -- by the exertion of labor, and possessing value in exchange, or exchangeability; a distinction which they recognized as essentially different from, and not necessarily associated with, value in use or usefulness. That man can neither create nor annihilate matter they repeated again and again in such phrases as: "Man can create nothing," and "Nothing can come out of nothing." They expressly excluded land itself and labor itself, and all personal capacities and powers and services, from the category of wealth, and were far ahead of their time in deriving the essential quality of money from its use in serving as a medium of exchange, and in including all usury laws in the restrictions that they would sweep away.
That these men rose in France, and as it were in the very palace of the absolute king, just as the rotten Bourbon dynasty was hastening to its fall, is one of the most striking of the paradoxes with which history abounds. Never, before nor since, out of the night of despotism gleamed there such clear light of liberty.
They were deluded by the idea -- the only possibility in fact, under existing conditions of carrying their views into effect in their time -- that the power of a king whose predecessor had said, "I am the state!" might be utilized to break the power of other special interests, and to bring liberty and plenty to France, and through France to the world.
They had their day of hope, and almost it must have seemed of assured triumph, when in 1774, three months before Quesnay's death, Turgot was made Finance Minister of Louis XVI, and at once began clearing the ways by cutting the restrictions that were stifling French industry. But they leaned on a reed. Turgot was removed. His reforms were stopped. The pent-up misery of the masses, which they had been so largely instrumental in showing utterly repugnant to the natural order, burst into the blind madness of the great revolution. The Physiocrats were overthrown, many of them perishing on the guillotine, in prison or in exile. In the reaction which the excesses of that revolution everywhere produced among those most influencing thought, the propertied and the powerful, the Physiocrats were remembered merely by their unfortunate misapprehension in regarding agriculture as the only productive occupation.
France will some day honor among the noblest the centuries have given her the names of Quesnay, and Gournay, and Turgot, and Mirabeau, and Condorcet, and Dupont, and their fellows, as we shall have in English, intelligent explanations, if not translations of their works. But, probably for the reason that France has as yet felt less than the English and Teutonic and Scandinavian nations the influence of the new philosophy of the natural order, best known as the Single Tax, the teachings of these men seem at present, even in France, to be practically forgotten.
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