Physiocrats

Anne-Robert-Jacques Turgot

One-breath summary: Integrating markets through free grain trade flattens price swings, which steadies farmers' expectations and lets them invest — so trade isn't just efficient, it's an engine of agricultural growth.

The mechanism:

1. Law of one price: the same homogeneous good can't long hold very different prices in connected markets, once transport/storage/financing costs are counted. If grain is much dearer in one place, merchants buy cheap and sell dear — arbitrage compresses the gap to within trading costs. connected markets converge to a price band set by the cost of moving the good (Turgot described the mechanism, never formalized it). Trade doesn't erase every price difference — it only keeps the gap from exceeding the cost of trading

2. Marché général: free grain circulation creates a broad commercial space where local, regional, and international markets are knit together by merchants, who move grain across space and time, buying where it's abundant and selling where it's scarce.

3. This smooths local shocks, narrows price swings, and (the key step) stabilizes farmers' profit expectations so they dare to invest. When a bad harvest hits one country, autarky dumps the entire shock on it, but open trade splits the shock — the stricken country's price rises less and the other's rises a bit, so scarcity is shared across a wider space rather than concentrated. Less price deviation means steadier, more regular investment, and over time more capital. Crucially, because shocks strike either country at random, the benefit of openness is an expected (long-run average) benefit, not one guaranteed in every single period — in any one bad year the importing partner can look worse off.

François Quesnay

One-breath summary: Only agriculture creates net wealth; a sufficiently "good price" sustained by free trade lets farmers reinvest; and the whole economy reproduces itself as a circular system — the Tableau Économique.

The mechanism (bon prix):

1. Only agriculture yields a produit net — a surplus over the inputs used; manufacture and commerce are sterile (they reshape existing wealth).

2. A price is "good" (bon prix) not when merely high, but when it clears the fundamental cost by enough to renew advances and fund land improvement.

3. The obstacle: merchants buy cheap wholesale from farmers and sell dear retail, pocketing the margin and squeezing farm profit.

4. Remedy: free foreign trade brings in competing buyers, which pushes the wholesale price up toward the retail price, restoring farm profitability.

5. Think of market openness as a dial. The more open and contestable the market, the smaller the merchant's margin and the higher the price the farmer receives.

6. A cost shock (e.g. a bad harvest raising production costs) raises the openness needed to keep the price "good" — so harder times demand more trade liberalization, not less.

The Tableau Économique of Quesnay

One-breath summary: The economy drawn as a closed loop of payments among three classes that must mesh for the system to repeat year after year — history's first general-equilibrium picture, driven by the spending of landowners.

The setup: Three classes — the productive class (agriculture), the proprietary class (landowners), and the sterile class (manufacture/commerce). For clarity Quesnay treats one unit of farm good, one unit of manufactured good, and one unit of money as exchanging one-for-one (a simplifying convention, not a real price system).

The mechanism — the annual circuit:

1. Proprietors start the loop by spending the rent received last period: part buys farm goods from the productive class, part buys manufactures from the sterile class.

2. The productive class, now holding money, buys manufactures from the sterile class to rebuild its circulating capital.

3. The sterile class, now holding money from both sources, spends it entirely on farm goods from the productive class (food + inputs).

4. The productive class recovers its money and pays it back to the proprietors as new rent — closing the loop so it can repeat next year.

• Stationary equilibrium — each year ends where it began; the system reproduces with no growth and no contraction.

• Structural interdependence — no class is self-sufficient; each needs the others to realize its product.

• Propulsive role of proprietors — though they don't produce, their spending is the starting point of all circulation.

• olicy conclusions: Because the system reproduces itself spontaneously when not obstructed, the right policy is laissez-faire; and the only tax consistent with the natural order is the single tax on net landed product.

Richard Cantillon

One-breath summary: Landowners' spending drives the whole economy through a multiplier — and, uniquely, it sets not just output but employment and the population the system can feed

He builds a more structured account of social classes and output around three pillars: class division by access to property, a split between the agricultural and the manufacturing-tertiary sectors, and effective demand

The mechanism:

1. Independent class = landowners (hold the land by historical conquest, receive about a third of farm output as rent). Dependent class = producing entrepreneurs and wage laborers.

2. Proprietors spend rent in the towns, setting effective demand in motion.

3. Proprietors' luxury spending is unstable (driven by fashion); the poor's consumption is stable (subsistence). Hoarding by proprietors contracts output.

4. the population the system can sustain depends on necessary consumption — so more proprietor spending raises output, which raises employment, which raises the number of people the economy can feed.

Pierre de Boisguilbert

One-breath summary: Output is below potential because the rich hoard instead of spending; redistribute toward the poor and open foreign markets, and the "multiplier" of luxury spending lifts production — a two-century-early sketch of Keynes.

The mechanism:

1. Two classes: the menu peuple (spend everything) and the beau monde (hold rents, hoard).

2. Mercantilist restrictions (tariffs, monopolies, grain bans) compress rural incomes, so the menu peuple — who would spend every penny — cannot consume enough.

3. The unjust tax system transfers wealth to the nobility and clergy, who hoard it rather than returning it to the productive circuit.

4. The result is actual output stuck below its potential — an underproduction trap sustained by excessive aristocratic saving.

of the rich is the engine of total output.

Reforms (his "strategic model"): Two remedies — (i) redistribute income toward the menu peuple by raising the share going to wages, which amplifies the multiplier; (ii) open foreign markets so grain can be exported, adding an autonomous source of demand that also enlarges the potential market. Neither alone cures underproduction, but combined they move output closest to potential, and commercial opening bites harder because it expands the size of the market, not just current demand.