The first real school of economic thought,
in the sense of a group of gifted disciples who followed a leader with a
message and a mission, was Physiocracy, and its leader was Francois Quesnay.
Little is known about Quesnay's youth. His parents did not support his
education so he did not learn to read until he was twelve years old. At age
twenty-four, however, he was practicing medicine successfully in a French
Quesnay began a reform
movement by attempting to apply the rule of natural law to the economic
problems that plagued eighteenth-century
Virtually on his own, Quesnay constructed a crude macroeconomic model of the French economy. This model attempted to trace the circular flow of income among economic groups in much the fashion of the circular flow diagrams that modern economists use. Quesnay called his model the Tableau Economique. It was unrefined by today's standards, but it was highly significant, nevertheless, because it was the first formal economic model in print. That is, it rested on specified assumptions (private property rights and freedom of economic choice), and it focused attention on a single economic variable of major importance, agricultural production.
Quesnay's model showed the national income of France not as it actually was in the middle of the eighteenth century, but as it could have been if only the tangle of feudal and mercantilist impediments to economic growth had been replaced by the "natural order" of free trade and open competition in the marketplace. It was not an open challenge to monarchy, however, for the Physiocrats feared the fickleness of the populace (in unwisely changing the natural order) more than they did the despotism of the king.
The idea of a net product
(the concept was a forerunner to the statistical entity Gross Domestic
Product, or GDP) was a direct consequence of Quesnay's model. But in arguing
that only agriculture was capable of producing a net product, the Physiocrats
made a serious error. That notion seems absurd today, but in the preindustrial society of eighteenth-century
Author: Ralph Byrns
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