Vinod Anand | 06 Apr 2012

From the times of the Mercantilists the main objective of early economic study was growth ? the production of increasing national wealth. But the Mercantilists, if they may be classed as a near-homogeneous group, were practical, not theoretical, men ? inductive rather than deductive in their reasoning.

THEIR WRITING was by individuals to fit individual cases. It is not until the French 'economists', the Physiocrats, that there is any attempt to organize the production of output into a unified aggregate system.The unifying conception, akin to the circulation of blood in the body, was symbolized by Quesnay's Tableau Economique. This conception placed economic study in line with the philosophical movement of the time towards the belief in the natural organization of the universe.

Economic organization could also be explained in terms of natural law which, of course, abhorred the regulations and state controls prescribed by Mercantilist doctrine. The performance of natural law was better served by leaving the system unshackled by control; 'laissez-faire, laissez-passer' was the only rule consistent with the proper attainment of the natural order of economic things.Quesnay's picture of the economic circulation showed that after exchange, necessary to replace inputs used up in the process of production of there remained something left over, a surplus - the product net. The Physiocratic view that only agriculture was capable of producing this net product does not reduce the significance of the Physiocratic method of distinguishing between real resources used up in producti0fl gross output, and the remaining surplus. Gross output was more than sufficient to replace raw materials and the wage fund, the physical costs of agricultural production.

The surplus thus remained to the landlord, without any process of exchange - which served to justify his social standing through his economic position as owner of property in land, the producer of the surplus. In terms of natural law this surplus - the product net - was something that was left over after exchange at natural values bad occurred in the system. Thus natural values were determined by real cost. This implied (as natural logic must) that real cost could be measured in physical terms as the produce that was necessary to provide labour and raw materials for the season's planting.

The value of a good was equal to its natural or physical equivalents so that real physical cost of production was equal to natural exchange value. The surplus remained after exchange at these natural values. The growth of the surplus was the result of natural forces, at exchange values determined by natural law. For the Physiocrat, growth, value and distribution were all part of the same natural process of circulation, an attitude which the Classical economists adopted more or less completely in their own approach to economy.