From the farm to the agricultural nation: the farmer as entrepreneur and the need for perfect freedom of trade

It is now time to deal in detail with Quesnay’s theory of economic government. Quesnay wrote most of these economic texts between 1756 and 1768. First, these were articles intended for the Encyclopedie (1756-58), then writings inserted into certain works by Mirabeau, such as the Theorie de l^,impot or Philosophie rurale (1760-63), then again, articles published in the Journal de l'agriculture, du com­merce et des finances or in the work Physiocratie (1765-68).

Quesnay’s first economic texts, the articles “Fermiers” and “Grains”, appear in Volumes 6 and 7 of the Encyclopedie, respectively, in 1756 and 1757. These articles are part of a set of texts intended for this publication, some of which - the articles “Hommes”, “Impots” and “Interet de l’argent” - were withdrawn by Quesnay when he ceased his collaboration with this dictionary. Essentially, they link the prosperity of an agricultural nation to two priorities: (i) following Boisguilbert, freedom of trade, internal and external; (ii) productive agriculture oriented towards the market and associating two main actors, the landowner and the farmer, for their role, respectively, in the circulation of revenue and in that of productive capital or “advances”.

The article “Fermiers” examines the accounting of an agricultural settlement according to two possible modes of cultivation: one, more modern, cultivation with horses, and the other, traditional, cultivation with oxen. Cultivation with horses, called “grande culture” (Quesnay 1756b, 139), more productive but also more expensive, is carried on by a farmer, that is to say an “entrepreneur” (Quesnay 1756b, 185), who possesses a fund of advances which he spends productively on seeds, horses and labour wages, in order to obtain a harvest of sufficient value to replenish the spent fund with a profit, and provide a revenue for the landowner and the sovereign. Cultivation with oxen, or “petite culture”, is that of the sharecrop­per, a peasant with meagre funds, tilling the land thanks to the advances of the landowner who supplies him with seeds and oxen and receives in return a part of the harvest, including the rent and what Quesnay (1756b, 129) calls “interets du prix des bestiaux”.^[74] Quesnay then performs a series of calculations to enlighten the landowner on the choice that he should make between these two methods of cultivation, then extrapolates this to the entire territory. His conclusion is clear: it is necessary to extend “grande culture” to all good land. Quesnay thus becomes the apostle of a method of cultivation based on the use of a large fund of advances and hired labour. In this context, the amount of rent is determined by negotia­tion between the landowner and the farmer.

However, neither the farmers nor the “grande culture” that they carry on are sufficient to guarantee abundance: there still needs to be freedom of circulation of agricultural products, of corn in particular, and above all freedom of their foreign trade:

It is not simply good or bad harvests that regulate the price of corn; it is mainly the freedom or constraint of the trade of this commodity that decides its value It would be ignoring the advantages of France to prevent the

export of corn for fear of running out, in a kingdom that can produce much more than could be sold abroad.

Quesnay 1756b, 149)

The article “Fermiers” thus concludes with the need for a “bon prix” (Quesnay 1756b, 140) for corn - a price high enough to compensate the farmer for his operat­ing expenses with a profit and pay the rent and the tax - and on the imperative of free foreign trade to reach this price level.

The purpose of the articles “Grains” and “Hommes” is precisely to demon­strate by calculation that the regime of free international competition only raises the price of corn moderately and stabilises it by eliminating its extreme variations. A few decades earlier, Boisguilbert had defended the idea that free internal and external trade made it possible to stabilise the price of corn and avoid food crises (Faccarello 1999). Quesnay returns to this question and intends to show that, in the case of “grande culture”, the “bon prix” of corn that is established under the effect of international competition allows the convergence of the interests of buyers and sellers, ensuring at the same time the prosperity of the country and sweeping away the traditional fear of the people, according to which freedom of circulation of agricultural products induces a repletion of their respective markets and an unsus­tainable rise in prices.

To this end, Quesnay draws up a comparative statement of the output and prof­itability of “grande culture” in two different situations:^[75] first under a regime of regulation of corn trade (Table 5.1), then under a free regime (Table 5.2). For each regime, the results are examined in five different typical years: those where

Table 5.1 Output and profitability in a regime of regulated corn trade

Table 5.2 Output and profitability in a regime of free corn trade

the physical output of the land (in setiers per acre)^[76] is bad, low, average, good or finally abundant. The farmer - considered as a producer selling his produc­tion on the local market - is here in the position of the entrepreneur in the sense of Cantillon ([1755] 1931, 41, 47-9) “working at a risk”, since his costs are certain - capital is advanced - while his profit is uncertain depending on the quan­tity produced and the market price.

The regime of regulated markets is illustrated in Table 5.1. The variation in output over the years (from three to seven setiers per arpent) causes the price of the setier to fluctuate significantly: low in abundant years (£10), it favours the consumer; conversely, very high in a poor year (£30), it favours the farmer, producer and seller. As the cultivation costs are assumed to be fixed (£74 per arpent), the result of the cultivation of an arpent by the farmer is paradoxical: due to the price effects increased by restrictions imposed on foreign trade, the farmer suffers a loss in good and abundant years and he earns only when his harvest is low or bad. In total, over the five typical years, he only earns on average £17 for an investment of £370 (or 4.6%). The interests of the consumer and the producer are opposed, since the former is supplied at a very high price in years where the producer makes its biggest gains and at a low price in years where the producer suffers a loss. This conflict of interest arises from the fact that the market price follows what the literature has called a King-Davenant^[77] relationship, namely that a reduction in the corn harvest results in a larger proportional increase in its price (Steiner 1994, 1998, 51-6).

Under a free trade regime, the situation is radically different (Table 5.2). Quesnay still assumes that the output fluctuates depending on the year, but the prices at which the harvests are sold now vary within much narrower limits (from £16 to £20). The first consequence of this price stabilisation is that the farmer earns more when the harvest is good and abundant: his interest as a producer then coin­cides with the interest of the consumer. Over the five typical years, the farmer’s profit now amounts to £70 for an investment of £370 (18.9%, i.e.

Three questions remain: (i) does not freedom of trade, in spite of everything, favour the producer to the detriment of the consumer? (ii) why does it stabilise the price of corn? and (iii) what is the farmer’s remuneration?

In response to the first question, it must be taken into account that Quesnay has no well-defined theory of price formation on the market beyond a few vague formulas, according to which “it is the very needs and quantity of production that decide its market value” (Quesnay 1766b, 958). Aware of this deficiency, he confided to the editors of the Journal de I'agriculture: “I ardently desire that you yourselves or someone else undertake the Essai sur les prix, which you have outlined in your reflections” (Quesnay 1766a, 833). Instead, Quesnay (1757a, 164) introduces two concepts: the “prix commun de l’acheteur” and the “prix commun du vendeur” to compare the situation of each of the two categories of agents over the set of five typical years. (i) The “prix commun de l’acheteur” is the simple average of prices over five years: it shows the average price of a unit of corn for the consumer. Equal to £17.4 in a regulated regime (87/5), it rises to £18 in a free regime (90/5), an increase of 3.4%. (ii) The “prix commun du ven- deur” is an average of prices weighted by the quantities produced. It indicates the average price at which a unit of corn is sold by the farmer: this price increases from £15.5 in a regulated regime (387/25) to £17.6 in a free regime (440/25), an increase of 14%. The removal of regulations therefore results in only a small increase in the average price for the buyer, but one that is more noticeable for the seller, which allows the prosperity of agriculture and the kingdom. The interests of both are now converging. Hence, the maxim that forms one of the leitmotifs of physiocracy: “Valuelessness [non-valeur] with abundance is not wealth. Dear­ness with scarcity is poverty. Dearness with abundance is opulence"' (Quesnay 1757a, 209).

As for the second question, under a regime of free trade, it is the international price of corn that prevails, that is to say “a common price between us and abroad... regulated by competition from the trade in commodities of neighbouring nations" (Quesnay 1757a, 211):

This general price is formed like the general level of the lakes and the seas that communicate with each other: if at different times the ocean does not receive water from the Mediterranean, and the Mediterranean does not receive any from the ocean, the general level of water from these seas is nonetheless equal; for this equality of level is always ensured by the commu­nication that these seas have with each other. It is the same with the equality of the general price between trading nations.

(Quesnay 1757-1758, 283)

This international price is stable due to the size of this market, the constant demand for a commodity that has no real substitute and the fact that the natural phenomena of abundance or scarcity are unevenly distributed between nations, some being in excess and, simultaneously, others in need. In this mechanism, neither national farmers who sell their harvest nor the international traders who circulate this have set the level of this price by their sole will or their arbitrariness. The price was imposed on them showing, according to Quesnay, the existence of a natural order or a natural balance of international trade and of a price system guaranteeing the prosperity of agricultural nations.

As for the farmer’s remuneration, if it is difficult to single it out in Quesnay’s first writings, it is quite clearly distinguished from the key notion of “produit net”. The “produit net” is what remains of the total agricultural product after the tithe and the cultivation cost have been paid (Quesnay 1757a, 177). What Quesnay calls the “prix commun fondamental” adds rent and tax to this cost (Quesnay 1757­1758, 279-80, 302). The interest of the latter notion is to reveal the farmer’s profit or earnings as the difference between the value of agricultural production and the fundamental price and as the part of the net product that goes to the latter. This is the reason why some commentators rank Quesnay among classical economists (from Smith to Marx) since, like a “price of production”, the “prix commun fonda­mental” contains part of the surplus or the net product (Cartelier 1991). In his later writings, Quesnay does not pursue the avenue leading to singling out the category of profit which he sees as an element of the production cost, thus reducing the net product to rent and tax.

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