SummaryThis is the first important school of economic thought, which included some of the best known economists of all times. Thanks to these authors, the study of economics became more of a science, instead of just a kind of philosophy. It took place from the late 18th century to the late 19th century.
Physiocracy is an eighteenth-century neologism from the Greek “physis,” nature, “kratia” authority: government of nature. It is the name that François Quesnay and his followers, the Physiocrats, gave in France from 1750 to the new science that saw in nature, especially in agriculture, the source of wealth. All useful and valuable things were generated, following the immutable natural order of economic and social relations studied by political economy. The Physiocrats were popularly known as “the economists” and aroused the interest of Adam Smith in Economics. His philosophy regarding the role of government is summarized in the famous phrase: laissez faire, which basically means letting the economic equilibrium arise from free will, believing the economy to be self-regulating. The emphasis on agriculture was to despise the value of trade by not adding new value to what was created by farmers.
Physiocracy coexisted with the main doctrine at that time, mercantilism. However, physiocracy had a few differentiating characteristics, such as the fact that it developed only in France, during a shorter period than mercantilism (only between 1750 and 1780), had a major intellectual leader, Quesnay, and developed a more analytical approach and models (such as Quesnay’s Tableau Économique), giving scientific status to the study of Economics.
Physiocracy and mercantilism also had some common characteristics, mainly the fact that they studied the economy (from its very core, the natural laws) in order to understand it, but also to formulate sound economic policies. This established the study and understanding of economy as a prerequisite in order to develop economic policies.