PHYSIOCRATS, PHYSIOCRACY. - An economic doctrine set forth in France by François Quesnay, the founder of political economy as a systematic science and, at the same time, the founder of individualism in economic science, to which he indeed gave the name physiocracy, that is, "empire of nature" (from the Greek φύσις = nature, χρῆσθαι = to rule).
Physiocracy is not, in truth, merely an economic theory, but also a part of the philosophy of the Enlightenment. Starting from the materialistic ideas of the time, it teaches that economic and moral phenomena must be considered as facts of nature, just as physical phenomena and the laws governing them are considered laws of nature. The essential task of the State is to guarantee the security and the rights of the individual. Among these is the natural economic right, which consists in the enjoyment of the things that the individual produces with his labor, and therefore in the right to existence. Another right is that of improving one's condition as much as possible, in pursuit of economic interest. From the pursuit of this interest there arises a natural order, which has its foundations in the laws of nature, as opposed to the historical order created by men. From this there follows as a necessary consequence the principle that the individual must act freely. To the question of what economic activity is according to nature, physiocracy teaches that the labor of the land is, according to the natural order, the first. On this alone, and especially on agriculture, is based the production of wealth and in general the whole economy. Not money, commerce, trade and industry are the sources of well-being, but agriculture, which makes these other activities possible, which by their own nature do not produce but merely change matter or place. Thereby the class of peasants (at that time especially the tenant farmers as against the great noble landowners) proves to be the truly economically productive class. Opposed to it are the class of "proprietors," who devote themselves to politics, and the sterile class of merchants and industrialists. To these three active classes there is added, as a passive class, that of wage-earning workers: this has in itself no economic activity, since it is not made up of entrepreneurs, but receives a fixed income (wages); it therefore enters into consideration only as a consuming class and must for that reason be especially commended to the care of the government. Naturally, since agricultural labor is the source of all wealth, agriculture must be favored, and it can prosper only if the prices of grain remain high, because only in this case can it yield a high net product and thus pay high incomes to the class of proprietors, of industrialists and of workers. Therefore all restrictions on the export of grain must fall. And since the soil is the only source of wealth, it alone must also bear the burden of taxes to the State, all the more so since any fiscal charge imposed on another class falls in the end on the class of great landowners: from this arises the characteristic concept of physiocracy, of the land tax as a single and direct tax. Indirect taxes cannot be admitted, inasmuch as they hamper commerce and weigh upon the people.
As can be seen, physiocracy has a double foundation. From the social and philosophical point of view it rests on the right of nature; the sacred and eternal rights of the individual must not be touched. The other foundation lies in the concept of a natural course of economic and social life: given indeed that economic laws cannot be in contradiction with the natural laws of social coexistence, inasmuch as they are themselves laws of the natural order, following the natural right, that is, one's own interest, will lead to developing economic life in the most natural, and therefore the best, way.
Physiocracy had as its principal representatives, besides Quesnay, Turgot, Badeau, Dupont de Nemours, Mercier de la Rivière, Mirabeau the elder; it had some connection with Smith and derived some ideas from Cantillon.