The Theory of Prices in Physiocracy

  • Gianni Vaggi
Part of the Studies in Political Economy book series (STPE)

Abstract

We have seen that Quesnay considered the gross and net output of the economy as value magnitudes, and not simply as physical quantities of agricultural products. Assumptions about the existence of the appropriate level of exchange values of foodstuffs are implicit in the Tableau Economique, where the measurement of national product requires the use of prices of ‘sales at first-hand’. It is now time to investigate what Quesnay said about the working of market forces and the specific concepts of price he adopted.

Keywords

Corn Transportation Income Expense Omic 

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Notes and References

  1. 5.
    An example of it can be found in Samuel Pufendorf’s De jure natura et gentium — libri octo, which was a popular textbook in Smith’s times (see Pufendorf, 1672, p. 676).Google Scholar
  2. 9.
    See also Maximes Générales, Meek, 1962, p. 257Google Scholar
  3. Extrait, Kuczynski and Meek, 1972, p. 9, note b.Google Scholar
  4. 11.
    On the factors which influence prices see also Sur les travaux des artisans, Meek, 1962, p. 227Google Scholar
  5. Extrait, Kuczynski and Meek, 1972, pp. 8–9, note bGoogle Scholar
  6. 24.
    If the rulers introduce ‘unsound regulations’, they cause great damage to the country. In fact, these measures lead to ‘a price out of harmony with the price which is general and common among other nations and this fact wipes out the revenue of the kingdom’ (Hommes, Meek, 1962, p. 91).Google Scholar
  7. 29.
    See Schelle, 1907, pp. 180–1; he says that this term was first used by Dupré de Saint Meur in his Essai sur les monnaies (1746).Google Scholar
  8. 48.
    Quesnay also uses the term prix naturel, by which he refers to the state of prices in an economy where natural laws have displayed their effects fully. In order to have a natural level of prices rulers must make economic policy conform to the indications of physiocracy. In particular, free competition in foreign trade is the most important policy measure for the establishment of ‘the natural state of price’ (Du Commerce, I.N.E.D., 1958, vol. II, p. 829; see also Le Trosne, 1777, p. 955). The existence of natural prices is the outcome of free and unobstructed competition.Google Scholar
  9. Quesnay speaks of ‘the additional burden of taxes on the natural price’ (Extrait, Kuczynski and Meek, 1972, p. 6, note a; see also Du Pont, 1774, p. 3).Google Scholar
  10. In fact, when Quesnay refers to the natural state of current prices, he writes: ‘indirect taxes weigh upon the prices received in sales at firsthand’ (Second problème économique, Meek, 1962, p. 195; see also Le Trosne, 1777, p. 990).Google Scholar
  11. But the retail price too can be far from its natural level; this happens when the costs of transportation exceed what is strictly required to bring the products to market. There are ‘some natural and indispensable expenses of trade, transportation and storage’ (Du Pont, 1774, p. 8), which are as necessary as the costs of cultivation, and can be regarded as part of the overall cost of production (see Mirabeau, 1764, vol. I, p. 347). But ‘an additional burden of expenses of transportation’ (Hommes, I.N.E.D., 1958, vol. II, p. 546) distorts the value of the retail price.Google Scholar
  12. 49.
    A similar dichotomy in the analysis of rent can be found in Smith’s Wealth of Nations, where rent is sometimes regarded as a revenue whose size depends on the level of prices (see Smith, 1776, vol. I, p. 93)Google Scholar
  13. 50.
    According to Bauer the ‘three rents approach’ can be traced back to John Bellers’ An Essay Towards the Improvement of Physick, etc. of 1714; see Bauer, 1895, pp. 5–6, note 1.Google Scholar
  14. It occurs in Charles King’s The British Merchant (King, 1721, vol. I, pp. 190–1) and in many writings in agricultural economics (see for instance John Mortimer, The whole art of husbandry, 1761, vol. I, pp. 310–11).Google Scholar
  15. 51.
    Turgot examines the market mechanisms which lead prices to an average value in Valeurs et monnais (see Turgot, 1769, pp. 89–93).Google Scholar

Copyright information

© Giovanni Vaggi 1987

Authors and Affiliations

  • Gianni Vaggi
    • 1
  1. 1.University of PaviaItaly

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