François Quesnay and the "Economic Table" (1758): how did a court physician fit the economy into a single diagram?

Before treating a patient, a physician has to understand the circulation of the blood. In the 18th century a French physician applied exactly this logic to a whole country: money and goods also "circulate" in society, so this circulation can be drawn. The result was one of the most famous diagrams in the history of economics.

Who was François Quesnay?

François Quesnay was born in 1694 and died in 1774 (Encyclopedia.com). At Versailles he served King Louis XV not as an economist but as a physician (Econlib). Encyclopedia.com notes that he published his first work on economics only in 1756, that is, when he was over 60 years old.

Britannica calls Quesnay the intellectual leader of the school of the physiocrats and describes this school as the first systematic school of political economy. The word "physiocracy" means "rule of nature".

What did the "Economic Table" show?

Quesnay's system was brought together in 1758 in the work "Tableau économique" ("Economic Table"). As Britannica writes, it showed in the form of a diagram the relationship between the various economic classes and sectors of society and the flow of payments between them. Through this work the concept of economic equilibrium entered economic thought and became a common starting point for later analysis.

In the diagram society is divided into three groups (based on the 1911 Britannica article): 1. The productive class: the farmers who work the land. 2. The landowners: those who receive the net product in the form of rent. 3. The "sterile" class: artisans and merchants. In the physiocrats' view they do useful work, but they do not create new wealth.

Encyclopedia.com notes that later, in 1766, Quesnay published a simplified version of the table in the form of an article.

What was the idea of the "net product" and the single tax?

In the physiocrats' view, only agriculture increases a nation's wealth (Britannica). A farmer sows one seed in the ground and gets a large harvest: the part left over after expenses was called the net product. As the 1911 Britannica article explains, it was precisely this net product that was considered the real annual addition to the wealth of society.

From this followed a logical tax conclusion: state revenue should be taken from the net product, that is, through a single direct tax, the land tax. The physiocrats also held that the state should not interfere with natural economic laws, and they opposed the high taxes and trade barriers of the mercantilists (Britannica).

Where did the physiocrats go wrong, and what remained of them?

Calling the artisan and the merchant "sterile" was later criticized. As the 1911 Britannica article writes, Adam Smith and others showed that branding industry and trade as "sterile" was a mistake. According to Britannica's summary, the school began to fade by 1768.

Nevertheless, the physiocrats introduced the scientific method into economics, and this influence proved lasting (Britannica). According to the 1911 Britannica article on Adam Smith, Smith became acquainted with Quesnay's circle in Paris and, despite its shortcomings, judged the physiocratic system to be the nearest to the truth of anything published up to that time. Econlib also stresses that Quesnay's work paved the way for classical economics, in particular for Smith.

The idea of showing the flows between sectors in a table found new life in the 20th century. Wassily Leontief received the Nobel Prize in economics in 1973 for the input–output method (NobelPrize.org). The preface of a book published by Cambridge University Press compares his work with the schemes of predecessors such as Quesnay and notes that it stands apart from them by its large-scale empirical basis.

Then and now

Example: who creates wealth in the village of "Oqdaryo"?

The model below was compiled by the author and is greatly simplified; the figures are hypothetical (billion soum). It is not an exact copy of Quesnay's table; it only shows the difference between "net product" and "value added".

In the hypothetical village of "Oqdaryo" the farmers grow a harvest worth 10 a year. They spend 5 on the living of their families and workers and 1 on tools and equipment bought from the artisan. The artisan usta Bahodir buys raw materials (cotton, wood) worth 2 from the farmers and sells goods worth 3; the remaining 1 goes on his own living.

A physiocrat sees only 4 of "real wealth" in this village and considers that the artisan creates nothing. Today's national accounts, by contrast, take into account both the artisan's value added of 1 and the labour income of the farmers and workers: 10 in total. The difference is this: Quesnay looked for the "gift" of the land, whereas modern economics counts the value created at every stage.

Where does this stand in history?

Link with the previous period: in the 14th century Ibn Khaldun had observed the link between the tax burden and the prosperity of the state; Quesnay tried to show the whole economy as a single closed circular diagram. At the next stage, in 1776, Adam Smith extended the source of wealth from agriculture to the division of labour and labour in all sectors.