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Quesnay's Tableau
Économique
The founding document of the the Physiocratic system was François
Quesnay's Tableau Économique (1759). Printed for private circulation, it
made its first public appearance in the Marquis de Mirabeau's L'ami des
hommes: Pt. 6 (1760). It went through a few more versions in Mirabeau
(1760, 1763), Mercier de la Riviere (1767) and DuPont de Nemours (1767).
The following example is taken from Quesnay's 1766 article "Analyse de la
formule arithmétique du Tableau Economique de la distribution des dépenses
annuelles d'une Nation agricole", published in the Journal de l'agriculture, du
commerce et des finances. The version presented here is from Hans Brems
(1986).
Quesnay identified three distinct classes:
(1) the proprietary class (landlords)
(2) the productive class (farmers and agricultural laborers)
(3) the sterile class (artisans and merchants)
The model in our example involves two goods, grains and crafts. Grains are
produced with land, labor and capital (meaning here livestock and seed). The
production of crafts require local grains and imported foreign goods as raw
materials. The following five protagonists are involved:
(1) Farmer: produces grain, owns livestock and seed, hires
labor, pays rent to landlord.
(2) Artisan: produces crafts, uses local grains and foreign goods
as raw materials.
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(3) Laborer: works for farmer, receives wages.
(4) Merchant: sells foreign goods he has imported and buys
local grain for export.
(5) Landlord: owns land, receives rent from farmer.
In order to survive from year to year, the protagonists have the following
consumption requirements:
Farmer: 150 grain + 150 crafts
Artisan: 150 grain + 150 crafts
Laborer: 150 grain + 150 crafts
Merchant: None.
Landlord: 300 grain + 300 crafts
The landlord, of course, has the most sumptuous lifestyle. The merchant,
being a foreigner, is only passing through, so he needs no local
sustenance.
Quesnay (1759, 1766a, 1766b) used the term "advances" to denote capital,
i.e. expenditures during a production process that are drawn from a
previously-accumulated fund. He identified four types of capital depending
on the sort of expenditures they were earmarked for.
(1) avances foncières (fundamental/landed advances): one-time
capital expenditures undertaken by landlords on their land, e.g.
land-clearing, drainage, fence-building, etc.
(2) avances souveraines (sovereign advances): one-time capital
expenditures undertaken by government, e.g. roads, bridges,
etc.
(3) avances primitives (primitive advances): expenditures on
durable producers' goods, e.g. horses, cattle, ploughs, etc. In
the Tableau, these are also referred to as avances originelles
(original advances).
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(4) avances annuelles (annual advances): expenditures on the
wages of labor and non-durable producers' goods, e.g. cattlefeed, seed, etc.
Of all these categories of advances, (3) and (4) are the most important and
the ones which Quesnay analyzed most deeply. Quesnay's distinction
between original advances and annual advances were imported by Adam
Smith (1776) as "fixed" and "circulating" capital respectively.
In our example, we shall ignore all forms of capital but the fourth, the avances
annuelles. We have two production processes -- grains and crafts -- and both
of them needs to use previously-accumulated stocks of grains as raw
materials.
To produce 1500 units of grain, the Farmer needs 300 units of grain to sow
his field and feed his cattle. But he also needs to keep himself and his laborer
alive during the course of the year. So, every year, he will retain 300 units of
grain, 150 for himself and 150 for his laborer. Of course, both the Farmer and
the Laborer have other needs, e.g. clothes, furniture etc. These crafts must
be bought on the market with cash, but the Farmer can only acquire cash by
selling his grain on the market. Thus, we shall assume that after the sale of
the grain, the Farmer keeps $300 cash to pay for crafts -- $150 for himself
and $150 for the Laborer. Thus, the Laborer's full wage in the course of the
entire year is 150 grain + $150 cash. The Farmer's expenditure on himself is
also 150 grain + $150 cash.
So, let us examine the expenditures and receipts of the Farmer. He produces
1500 units of grain, retains 600 units for internal use (avances annuelles =
seed, cattle-feed, food for himself and Laborer) and places the remaining 900
units of grain on the market. The 900 grains converts into $900 cash on the
market, of which $300 will be taken to buy crafts for himself and his Laborer,
thereby leaving 600 left over. This $600 is the net product.
Let us now turn to the Artisan. To produce 750 units of crafts, he needs 300
units of grain as raw material and $150-worth of foreign inputs (e.g. imported
cloth, etc.) He needs to buy both of these with cash -- the grain on the local
grain market, the foreign inputs from the foreign merchant. But the Artisan
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also needs to live during the year. We shall assume he has the same
consumption needs as the Farmer and the Laborer, i.e. 150 crafts + 150
grain. He can produce the crafts for himself (i.e. he retains 150 units of crafts
for own-consumption), but the 150 grain needs to be acquired on the market.
So, every year, the Artisan needs to buy a total of 450 units of grain on the
market and $150-worth of inputs from the foreign merchant. Consequently he
needs $600 in cash, which he must acquire by selling 600 units of crafts on
the market. As his total output (750 crafts) is equal to his total expenditures
(750 = 150 crafts + $600 cash), then the artisan produces no net product.
Now, let us turn to the proprietor class. The Landlord's sumptuous lifestyle
requires 300 grains + 300 crafts which must be bought on the market. He
thus has a need for $600 cash. He acquires this by charging the Farmer $600
rent for the year. Notice that, with his rent, the Landlord has just expropriated
the entire net product of the Farmer.
The Merchant is the only loose end. We will just suppose that he brings
$150-worth of foreign inputs (which he sells to the artisan) and then turns
around and uses the cash to buy 150 units of local grain for export.
He needs to buy both of these with cash -- the grain on the local grain
market, the foreign inputs from the foreign merchant. But, remember, the
Artisan also needs to live. He can produce crafts for himself (he retains 150
units of crafts for own-consumption) and he needs to buy 150 units of corn on
the market.
the grain on the market with cash
He also needs to retain 150 units of grain to pay his laborer during the year.
That is not his full wage. The laborer still expects a further $150 in cash in
order to buy crafts (e.g. clothes, furniture, etc.) for himself. However, we shall
assume that the Farmer pays the laborer his $150 cash wage after the sale of
the grain on the market.
(annual advances), which refer to expenditures on the wages of labor and
non-durable producers' goods (e.g. cattle-feed seed).
François Quesnay (1759, 1766a, 1766b) explicitly used the term "advances"
to denote capital. That very term suggests these advances are drawn from a
fund of some sort and so take monetary form. Quesnay divided advances into
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at least four categories depending on the sort of expenditures they were
earmarked for: (1) avances foncières (fundamental/landed advances): onetime capital expenditures undertaken by landlords on their land, e.g. landclearing, drainage, fence-building, etc. (2) avances souveraines (sovereign
advances): one-time capital expenditures undertaken by government, e.g.
roads, bridges, etc. (3) avances primitives (primitive advances): expenditures
on durable producers' goods, e.g. horses, cattle, ploughs, etc. In the Tableau,
these are also referred to as avances originelles (original advances). (4)
avances annuelles (annual advances): expenditures on the wages of labor
and non-durable producers' goods, e.g. cattle-feed, seed, etc. Of all these
categories of advances, (3) and (4) are the most important and the ones
which Quesnay analyzed most deeply. Quesnay's distinction between original
advances and annual advances were imported by Smith into fixed capital and
circulating capital.
Farmers
Suppose the farmer wishes to produce 1500 units of grain and the artisan
wishes to produce 750 units of crafts. Their capital requirements are:
Farmer: 300 grain for seed and livestock + wages of laborer
(150 grain + $150 cash)
Artisan: 300 grain as raw material for crafts + 150 units of
foreign inputs.
Merchant: 150 units of grain for export.
which we can categorize into five people (or heads of household) - a farmer
(F), a farmhand (H), a landlord (L), an artisan (A) and a foreign merchant (M).
Only the Farmer and the Artisan produce goods -- the first produces grain, the
second produces crafts. Following Quesnay, we have no prices in this
system: a "unit" of grain and a "unit" of craft sells for a single livre (a unit of
cash) in the market place. We look at his example from three sides: product
side, flow of funds side and income side.
Consumption Requirements:
Farmer: 150 grain + 150 crafts
Laborer: 150 grain + 150 crafts
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Artisan: 150 grain + 150 crafts
Landlord: 300 grain + 300 crafts
Livestock: 300 grain
Merchant: No requirement (needs 150 grain for export)
Production Requirements:
Production of grain requires inputs of labor, land and livestock
Production of crafts requires grain and foreign inputs as raw materials
It may seem that we do not need seed to produce grain, but let us assume
that the "Livestock" means both animal capital and seed capital.
(1) Production Side
Only Farmer and Artisan produce. Some of their produce they retain
internally, the rest they supply to market. What is supplied to market is
exchanged for cash; what is retained internally does not command cash. At
the market, their goods are bought up by different people.
In the following account, we trace the movement of grains and crafts. Note
that that these numbers are not payments but merely how the actual output
flows. Here is the account:
Agricultural Sector: (output owned by Farmer)


Produces 1500 grain = 600 internal + 900 to market.
Of which:
o Internal = 600 = 300 to Livestock + 150 to Laborer + 150 to Farmer.
o To Market = 900 = 300 to Landlord + 450 to Artisan + 150 to
Merchant
Manufacturing Sector: (output owned by Artisan)


Produces 750 crafts = 150 internal + 600 to market.
Of which:
o Internal = 150 for Artisan
o To Market = 600 = 150 to Farmer + 150 to Laborer + 300 to Landlord
Notes: In the agricultural sector the Farmer has to use part of his output to
feed his livestock, a new category. Note also that the Merchant does not buy
any of the Artisan's goods, but only the Farmer's grain. The Laborer is to
receive 150 of the Farmer's output. This is only part of his wage (paid in
kind). Another part will be paid in cash (as we shall see). The 300 units of
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grain going to the Landlord are not rent payments -- the Landlord just
happens to buy the Farmer's grain on the market place.
(2) Flow of Funds Side
Let us now turn to tracing the cash flow. Cash is exchanged for the goods on
the market -- i.e. for agricultural goods and manufactured goods. We have
not mentioned factors of production and their payment yet. So, we must now
put them in place. There are three factors which trade for "cash": the labor of
the farmhand (used by farmer and for which a cash wage is paid), the land of
the landlord (used by farmer, and for which a cash rent is paid), and finally
imported inputs from the foreign merchant (used by the artisan, which must be
paid in cash). So, cash trades against both commodities and factors.
Farmer:



Receives $900 from selling grain in the market (see above)
Then:
o Pays himself 150 units of grain.
o Pays Laborer $150 in cash, 150 in grain.
o Pays Landlord $600 in cash (for rent)
o Pays Artisan $150 in cash (for crafts)
Thus: Farmer gets $900 in cash and spends $900 in cash.
Landlord:



Receives $600 in cash from Farmer as rent payment
Then:
o Pays Farmer $300 in cash (for grain)
o Pays Artisan $300 in cash (for crafts)
So gets $ 600 in cash and pays spends $ 600 in cash.
Artisan:



Receives $600 in cash from selling crafts in the market (see above)
Then:
o Pays $300 in cash to Farmer (for grain to be used as raw materials)
o Pays $150 in cash to Farmer (for grain for own consumption)
o Pays $150 in cash to Merchant (for imported inputs)
So gets $600 in cash and pays spends $600 in cash. Notice that the 300 grains
he gets as raw materials is lost to the economy (perhaps he makes baskets out
of livre notes!)
Farmhand:
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


Receives $150 in cash from Farmer (wage paid-in-cash) + 150 in grain from
Farmer (wage paid-in-kind)
Then:
o Pays $150 in cash to Artisan (for crafts)
So gets $150 in cash and pays $150 in cash.
Foreign Merchant:



Receives $150 in cash from Artisan (for imported inputs)
Then:
o Pays $150 in cash to Farmer (for grain)
So gets $150 in cash and pays $150 in cash.
(3) Income Side
"Net product" (Quesnay's produit net) is the output that exists over and above
that amount necessary as inputs to the production process. By "necessary"
we mean either as capital inputs (e.g. as feed to livestock or raw materials) or
to compensate humans for the toil and trouble of producing.
Farmer:





Produces = 1500
Total Income = 1500
External Costs = 300 to Laborer + 300 to Livestock + 600 to Landlord (as
rent)
Own-income = 300
Net Product = 600
Farmhand:





Produces = 0
Total Income = 300
External Costs = 0
Own-Income = 300
Net Product = 0
Landlord:





Produces = 0
Total Income = 600
External Costs = 0
Own-Income = 600
Net Product = 0
Artisan:
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




Produces = 750
Total Income = 750
External Costs = 450 = 300 for raw materials + 150 for imports
Own-Income = 300
Net Product = 0
Note that only the farmer produces a "net product". The artisan has spent all
his output on the production process - on raw materials, imports and
compensating for his own toil. The farmer, in contrast, spent on livestock and
in compensating himself and his farmhand for their toil - but his payment to
the landowner does not constitute "compensation" for the landlord's "toil and
trouble" for he has not undertaken any. The Physiocrats believed land was a
"natural gift" to men, and thus did not think that an owner of land was
undergoing "toil and trouble" in letting it be used by others and thus there is
no such thing as "compensation" to the landlord - it simply was not thought of
as "natural". He just grabs the net product.
In contrast, we should note that the landlord is not the only "sterile" person
here. In fact, the only "productive" person is the farmer, the only one that
generated a net product. The landlord, the farmhand, the foreign merchant
and, most notably, the artisan, are all part of the "sterile class" because none
of them generated a net product.
Note also that it is not necessary that the "net product" accrue to the landlord.
The farmer could have kept it himself (if he could). We have unjustifiably
assumed outright that what the farmer retained for himself (the 300 units of
grain) was just necessary to compensate him for his toil and not more. The
Physiocrats advocated taxation schemes that would redistribute net products
from the sterile to the productive classes (the "single tax on land"). We should
also note that this was more a normative than a positive exercise, an idealized
"natural" system: Quesnay repeatedly notes that "real" conditions are never
as smooth as this example purports, that there are real distortions (e.g. cashflow problems, inequitable taxation, insufficient compensation due to
excessive taxes or rents, underdeveloped markets, transportation costs,
protectionist trade distortions, legal costs, etc.) but that it was the prerogative
of government to ensure that these problems were mitigated if not eliminated
altogether.
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