Physiocracy

PHYSIOCRACY.

Before turning to Physiocracy proper, it is necessary to say a few introductory words on the nature of ‘theorising production’. It has previously been mentioned that one scholarly interpretation of the limitations of older, ancient (Greek) attempts to write about economics is that they failed to develop a concept of ‘the economy’. Such a concept slowly emerged as a result of two distinct but inter-related issues.

First of all was some recognition of the longevity of social systems. Generations come and generations go, but ‘the system’ holds together. There might over time be changes in the methods by which things are accomplished: there might be institutional changes; or, indeed, things might remain remarkably unchanged for generations, but somehow ‘the system’ replicates itself. Human social systems ‘work’. So questions began to be asked about how ‘societies’ survive; what are the necessary conditions for the continued existence of various forms of social organisation?

Secondly, and we shall come to this again with Adam Smith, there was growing recognition of, and the need to think about, the ‘division of labour’. The ‘social system’ contains some people who produce corn, vegetables, wine: others produce cloth and clothing, pots and utensils; yet others produce tools and ‘machines’, hammers, looms and spindles.

Having said these few simple (even trivial) words, let’s proceed immediately to the modern economist’s abstract way of putting these words into rigorous form. Imagine an ‘economy’ that produces goods, where can be any number. In order to produce any one of them, labour is needed; if it is an agricultural good, land will be needed. Other necessary ‘inputs’ might include some form of tools or machines. As tools and machines may be used to produce different kinds of outputs, we must distinguish between the tool being used and the good it is used to produce. An example will be useful here. Assume good 1 is being produced. Write down the following.

The inputs labelled are the tools and machines: the first subscript, in this case 1, refers to the good being produced; the second subscript refers to the good being used. Labour is denoted by the letter , and land by (terra). As these are assumed homogeneous, they require only one subscript. The ‘output’ is given on the right by. All these items are denominated in appropriate units, land by units of area, say, hectares, labour by units of work-time, weeks or years etc…

As grasping these concepts is not too demanding, move directly to representing the whole ‘economy’, where the omitted items, represented by dots, can easily be filled in.

SIMPLIFICATION.

The above has been introduced for two purposes. First, of course, is the one mentioned