What is Physiocracy, Inversion Of Mercantilism and Physiocracy

Adam Smith was influenced during his travel in France by a group of French writers who have become known as the physiocrats. They perceived the interrelatedness of the sectors of the economy and analyzed the working of nonregulated markets.

Although mercantilism was much in evidence in eighteenth-century France, a new but short-lived movement called physiocracy began there around 1750. Because it provided significant analytical insights into the economy, its influence on subsequent economic thought was considerable. Scholars of economic ideas often arbitrarily group people with divergent ideas into a school of thought, usually on the basis of a single similarity. However, the writings of the physio-cratic school express remarkably consistent views on all major points. There are three reasons for this. (1) Physiocracy developed exclusively in France. (2) The ideas of the physiocrats were presented over a relatively short period of time, from about 1750 to 1780. (It has been said that no one was aware of physiocratic ideas before 1750, and after 1780 only a few economists had heard of them.) (3) Physiocracy had an acknowledged intellectual leader, Francois Quesnay (1694-1774), whose ideas were accepted virtually without question by his fellow physiocrats. Their own writings were mainly designed to convince others of the merit of Quesnay's economics.

Natural Law

The physiocrats, like the later English mercantilists, developed their economic theories in order to formulate correct economic policies. Both groups believed that the correct formulation of economic policy required a correct understanding of the economy. Economic theory was therefore a prerequisite of economic policy. The physiocrats' unique idea concerned the role of natural law in the formulation of policy. They maintained that natural laws governed the operation of the economy and that, although these laws were independent of human will, humans could objectively discover them—as they could the laws of the natural sciences. This idea contributed significantly to the development of economics and the social sciences.