The Beginnings in Political Economy
At the court of Versailles, with access to the king, Quesnay’s social network thrived and he was often in contact with some of the leading philosophes of the age such as Denis Diderot, Jean Le Rond D’Alembert, Charles Pinot Duclos, Claude-Adrien Helvetius and Etienne Bonnot de Condillac.
It seems, however, that it was through the intervention of a close friend, Charles-Georges Leroy, Lieutenant of Hunting in Versailles, that Quesnay was requested to contribute to Diderot and D’Alembert’s Encyclopedie (Charles and There 2008). Quesnay provided several articles but finally only allowed the publication of three of them - “Evidence”, “Fermiers” and “Grains” - in two fields, that is, metaphysics and political economy, but nothing on surgery or medicine. This suggests that it was well known by the mid-1750s that the doctor had turned his attention to these subjects. Everything leads us to believe that he began with philosophy. The second edition of the Essai sur l,oeconomie animale (1747) contains major developments on the theory of knowledge, the operation of the understanding and natural law. On these subjects Quesnay was mainly inspired by Locke and the continental empiricist tradition championed by Condillac. The entry “Evidence” published in 1756 in volume 6 of the Encyclopedie confirms this: Quesnay argues that our knowledge comes from sensations and that while we are looking for pleasant sensations we try to avoid painful ones. But the end of the article opens the door to another way of thinking. Quesnay denies that morality is based upon perceptions and language, as in Condillac’s approach, but links instead his sensationism with the Cartesian tradition. The moral behaviour of man has to comply with a natural order willed by the Creator. To summarize, sensations of pleasure and pain determine our (interested) behaviour, by a sort of calculus, but these pieces of information (sensations) have to be guided by the natural laws, which the theoretician (Quesnay) is able to reveal from faith (Steiner 1998: 43-8, Orain 2006). This outlook finds a natural playground in political economy.From the study of his library (Cartelier and Longhitano 2012: 193-240), we know that Quesnay did not own any books on economics - in a broad sense - published before 1750. Those published after 1753 are more numerous, but they deal largely with economie rustique or agronomy. Now the interest in the cultivation of land was increasing and Quesnay followed the general movement by learning about the economy with the whole generation, which began, by 1750, according to the famous formula of Voltaire, “to argue about grain”. It is clear that the entries “Fermiers” (1756) and “Grains” (1757) and also the unpublished “Impots” and “Hommes” are at the confluence of agronomy and the debate about the freedom of the grain trade (Charles 1999, pt 3, ch. 1). In these texts where Quesnay puts forward the core of his theory which places agriculture at the centre of his thinking, agronomical arguments - the preference for the horse to the ox, the necessity of a three-year crop rotation system - are mixed with economic arguments: the grande culture, that of farmers who are real entrepreneurs of agriculture, is praised and contrasted with the petite culture of the sharecroppers.
It is in these articles that the important concept ofproduit net appears. By producing an analogy with agricultural accounting where the farmer deducts his costs from the harvest sold, Quesnay defines the “net product” first by the surplus beyond the cost of production - the prix fondamental: wages, raw materials and taxes. Here the farmer’s profit belongs to the “net product” (Charles 1999, pt 3, ch. 1). Then, in his writings subsequent to the entry “Impots”, the definitive definition of the concept is proposed: the “net product” - called the revenu (income) - is a surplus disponible (disposable surplus), that is, the rent of the landlords on which to levy taxes for the king and the church. The avances annuelles and the interet des avances, a percentage of the avancesprimitives, the fixed capital of tools and equipment and of the avances annuelles, the circulating capital or “the labour costs spent on performing the annual work of one plough” (wages, raw materials, farmer’s gain) (Mirabeau and Quesnay 1763: 30), are deducted from the total output.
In this definition, more specifically presented in Philosophie rurale (Mirabeau and Quesnay 1763), the fermier receives two kinds of remuneration that are separated from the landlord’s net product (see Charles 1999, pt 3, ch. 1). The first one, “grouped in the expenditures of his annual advances” (Mirabeau and Quesnay 1763: 131) corresponds to the activity of the agricultural entrepreneur, “the care, the works and the risks of his enterprise”. The second, the interest of the advances (annuelles and primitives), is the return on capital, what the advances “must yield to each one, as in any commerce that entails risks and in which the return of the money advanced requires at least one year, must yield, say I, an interest of 10 per cent” (ibid.: 134). But these incomes of the agricultural entrepreneur are not “available” in Quesnay’s vocabulary because, if they decrease, the total output of agriculture is also going to decrease, which is of course undesirable. More precisely, if the gain of the fermier, included in the advances, and the interest on the same advances are too low, the entrepreneur could be tempted either to reduce his future advances in order to maintain his remuneration or to abandon his activity. Even if he decides to maintain the level of the future advances, a low remuneration will not enable the agricultural entrepreneur to expand his farming business, the actual aim of all the physiocratic “net product” doctrine. This is why the gain and the profit of the advances must never bear taxes, of any kind, contrary to the landlord’s “net product”.In these early texts, Quesnay also puts forward the famous doctrine of the exclusive productivity of agriculture, in other words the idea that there is no “net product” in trade and industry. This idea, which was to take on ever more importance in his thinking, mixes a physical and a value approach: industry does not create new wealth; it gathers pre-existent wealth. In agriculture the value of output exceeds the costs, while in manufacturing the two coincide.
The profit and the interest on the advances in trade and industry are, as in agriculture, included in the costs of production. At the end of the process there is no available income, the “gift of nature” which only appears in agriculture. Now, it is the amount of the capital invested in this last sector that determines the amount of the nation’s “net product”. To increase the national wealth, a large investment in agriculture has to be made and the farmers’ profits have to be increased. Only the freedom of the grain trade could produce this movement to Quesnay’s mind. However, Quesnay was not entirely consistent on this issue since he acknowledged the existence of what he called “the small net product of commerce” that is the revenue accruing to the countries which had set up an export-led economy (Steiner 1997: 705-6). These countries (or commercial republics) have sacrificed their agricultural sector in keeping the price of food low so that they can offer maritime transport services at a low cost to other countries (agricultural kingdoms). Their service being less costly, commercial republics can spare a part of the money received from the agricultural kingdom as their “small net product”. Nevertheless, it would be a complete mistake to follow such a policy in an agricultural kingdom, which must stick to the large net product from the agricultural sector.The article “Hommes” proposes a five-year framework in two tables (see Steiner 1994, 1998): a stable cost (the prix fondamental) but different incomes due to the quantity and prices depending on the harvests each year (from “plentiful” to “bad” year/harvest). The first table presents a country (in reality, France) where the internal traffic of grain within the country is difficult and exports are forbidden. Here grain prices are subjected to a King-Davenant effect: the rises in prices are more than proportional to the deficits of the harvest. The difference between the highest price and the lowest is 20 livres (from a range of 10 to 30) but it is only in the “bad” years, when the harvest is poor and the price very high, that the farmer makes (a little) money.
In the second table (in reality, England), the freedom of the grain trade causes the effect to vanish despite the same climate changes and the range of prices is considerably narrowed: 4 livres (from 16 to 20). By the principle of arbitration, which channels the grain to where people lack it, the country participates in the international market with a stabilized price. Quesnay calls it the bon prix (good price). Here the advantages for the kingdom are many. For consumers, the prix commun de l,acheteur - that is, the average price paid by the consumer - is almost stable (18 livres with freedom versus 17.5 in the prohibitionist state), but for farmers the profits are (substantially) increased and, moreover, they grow richer in four out of every five years and especially so during the “good” harvests. The freedom of the grain trade eliminates the conflict of interests between consumers and producers: everyone has an interest in plentiful harvests. With powerful agriculture, the French kingdom, concluded Quesnay, would be able to maintain a large population and a strong navy so as to sustain the rivalry with England. This theoretical result explains why Quesnay was to try to convince the royal powers, public opinion and the high administration of the benefits of free competition. Before doing so, in the social setting of the court of Versailles, Quesnay had recruited collaborators for their skills in agronomy and arithmetic (Charles-Richard de Butre, Georges Le Roy, Etienne-Claude de Marivetz and Henry Pattulo), who helped him in his works, but who were not his disciples (see Charles and There 2008). When he switched from practical economy to the creation of a new science, the doctor needed to create new means and a real school through which to spread his ideas.