As discussed in the previous post, in the mid-18th century Physiocracy emerged as an economic theory and was able to not only overcome the weaknesses of Mercantilism but also effectively respond to the prevailing political conditions in Europe at that time.
In here we can see key principles and policies associated with Physiocracy:
1. Primacy of Agriculture -
According to physiocrats, a nation's main source of wealth is its agricultural output. And also, according to them agriculture produced a "net product" or surplus that could be taxed to support the state and non-agricultural activities. Physiocrats believed that promoting agriculture would lead to economic growth.
2. Tableau economique –
This is a concept which is developed by Francisco Quesnay and is also central element of Physiocracy. Also, this concept/theory was explained by a diagram. This diagram depicts the interdependence of economic classes and sectors specially the role of agricultural sector.
3. Single tax system –
This concept proposes a single tax on agricultural land. This would replace various taxes and revenue sources and it will lead to a simplified tax structure.
4. Laissez-Faire –
Laissez faire, which literally translates as "allow to do”, with the idea being "let people do as they choose”. Physiocrats believed in minimal government intervention in the economy. They argued that the government should not interfere with the natural economic order.
5. Opposition to Mercantilism –
Physiocracy emerged as overcome the weaknesses of Mercantilism. While mercantilism considered aggregation of precise metals as the wealth (refer previous post), in physiocracy lands especially fertile lands use for agricultural activities was considered as the ultimate source of value and the foundation on which the economy relies.
Ø Written by
Mithila Madhawa 20829
Lithira Rajapaksha 20896
References
· Laissez-Faire
· THE PHYSIOCRATIC THEORY OF ECONOMIC POLICY By WARREN J. SAMUELS
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