Tableau économique - AbsoluteAstronomy.com

The Tableau économique or Economic Table is an economic model first described in François Quesnay

François Quesnay

François Quesnay was a French economist of the Physiocratic school. He is known for publishing the "Tableau économique" in 1758, which provided the foundations of the ideas of the Physiocrats...

in 1759, which lay the foundation of the Physiocrats

Physiocrats

Physiocracy is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of "land agriculture" or "land development." Their theories originated in France and were most popular during the second half of the 18th...

’ economic theories.

Quesnay believed that trade and industry were not sources of wealth, and instead in his book, Tableau économique (1758, Economic Table) argued that agricultural surpluses, by flowing through the economy in the form of rent, wages and purchases, were the real economic movers. Firstly, said Quesnay, regulation impedes the flow of income throughout all social classes and therefore economic development. Secondly, taxes on the productive classes, such as farmers, should be reduced in favour of rises for unproductive classes, such as landowners, since their luxurious way of life distorts the income flow.

The model

The model Quesnay created consisted of three economic movers. The "Proprietary" class consisted of only landowners. The "Productive" class consisted of all agricultural laborers. The "Sterile" class is made up of artisans and merchants. The flow of production and/or cash between the three classes started with the Proprietary class because they own the land and they buy from both of the other classes. The process has these steps (consult Figure 1).

The farmer produces 1,500 food on land leased from the landlord. Of that 1,500, he retains 600 food to feed himself, his livestock, and any laborers he hires. He sells the remaining 900 in the market for $1 per unit of food. He keeps $300 ($150 for himself, $150 for his laborer) to buy non-farm goods (clothes, household goods, etc) from the merchants and artisans. This produces $600 of net profit, to which Quesnay refers as produit net.
The artisan produces 750 units of crafts. To produce at that level, he needs 300 units of food and 150 units of foreign goods. He also has subsistence need of 150 units of food and 150 units of crafts to keep himself alive during the year. The total is 450 units of food, 150 units of crafts, and 150 units of foreign goods. He buys $450 of food from the farmer and $150 of goods from the merchant, and he sells 600 units of crafts at the market for $600. Because the artisan must use the cash he made selling his crafts to buy raw materials for the next year’s production, he has no net profit.
The landlord is only a consumer of food and crafts and produces no product at all. His supposed "contribution" to the production process is the redistribution of $600 in land rent the farmer pays for the use of naturally occurring land. The landlord uses $300 of the rent to buy food from the farmer in the market and $300 to buy crafts from the artisan. Because he is purely a consumer, Quesnay considers the landlord the prime mover of economic activity. It is his desire to consume which causes him to expend his entire lease income on food and crafts and which provides income to the other classes.
The merchant is the mechanism for exporting food in exchange for foreign imports. The merchant uses the $150 he received from the artisan to buy food from the market, and it is assumed that he takes the food out of the country to exchange it for more foreign goods.

Figure 1 Production Flow Diagram for Quesnay's Tableau (4)

The Tableau shows the reason why the Physiocrats disagreed with Cantillon about exporting food. The economy produces a surplus of food, and neither the farmer nor the artisan can afford to consume more than a subsistence level of food. The landlord is assumed to be consuming at a level of satiation; therefore, he cannot consume any more. Since food cannot be stored easily, it is necessary to sell it to someone who can use it. This is where the merchant provides value.

Physiocratic interpretation

The merchant is not a source of wealth, however. The Physiocrats

Physiocrats

believed that “neither industry nor commerce generates wealth.” A “plausible explanation is that the Physiocrats developed their theory in light of the actual situation of the French economy…” France was an absolute monarchy with the land owners constituting 6-8% of the population and owning 50% of the land. (5, p. 859) Agriculture contributes 80% of the country’s wealth, and the non-land owning segment of the population “practises a subsistence agriculture that produces the essential minimum, with virtually all income being absorbed by food requirements.” Additionally, exports consisted mostly of agricultural-based products, e.g. wine. Given the massive effect of agriculture on France’s economy, it was more likely they would develop an economic model that used it to the king’s advantage.

The Physiocrats are at the beginning of the anti-mercantilist movement. Quesnay’s argument against industry and international trade as alternatives to his doctrine is twofold. First, industry produces no gain in wealth; therefore, redirecting labor from agriculture to industry will in effect decrease the nation’s overall wealth. Additionally, population expands to fill available land and food supply; therefore, population must go down if the use of land does not produce food. Second, the basic premise of the Mercantilists is that a country must export more than it imports to gain wealth, but that assumes it has more of a tradeable resource than it needs for internal consumption. France did not have a colony with the ability to produce finished or semi-finished goods like England (i.e. India) or Holland (i.e. North America, Africa, South America). Its main colonial presence was in the Caribbean, southern North America, and southeast Asia, and like France, the colonies had agricultural-based economies. The only good which France had in enough excess to export was food; therefore, international trade based on industrial production would not yield as much wealth.

Quesnay was not anti-industry, however. He was just realistic in his assessment that France was not in good position to incubate a strong industrial market. His argument was that artisans and manufacturers would come to France only in proportion to the size of the internal market for their goods. Quesnay believed “a country should concentrate on manufacturing only to the extent that the local availability of raw materials and suitable labor enabled it to have a cost advantage over its overseas competitors.” Anything above that amount should be purchased through trade.

Legacy

The tableau économique is credited as the "first precise formulation" of interdependent systems in economics and the origin of the theory of the multiplier

Multiplier (economics)

In economics, the fiscal multiplier is the ratio of a change in national income to the change in government spending that causes it. More generally, the exogenous spending multiplier is the ratio of a change in national income to any autonomous change in spending In economics, the fiscal...

in economics. An analogous table is used in the theory of money creation

Money creation

In economics, money creation is the process by which the money supply of a country or a monetary region is increased due to some reason. There are two principal stages of money creation. First, the central bank introduces new money into the economy by purchasing financial assets or lending money...

under fractional-reserve banking

Fractional-reserve banking

Fractional-reserve banking is a form of banking where banks maintain reserves that are only a fraction of the customer's deposits. Funds deposited into a bank are mostly lent out, and a bank keeps only a fraction of the quantity of deposits as reserves...

by relending of deposits, leading to the money multiplier

Money multiplier

In monetary economics, a money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Most often, it measures the maximum amount of commercial bank money that can be created by a given unit of central bank money...

.

The wage-fund doctrine

Wage-fund doctrine

The Wage-Fund Doctrine is an expression that comes from early economic theory that seeks to show that the amount of money a worker earns in wages, paid to them from a fixed amount of funds available to employers each year , is determined by the relationship of wages and capital to any changes in...

was derived from the tableau, then later rejected.

External links

The History of Economic Thought Website, The New School of Social Research. 6 Feb. 2006
Tableau Économique - Modern view

The source of this article is wikipedia, the free encyclopedia. The text of this article is licensed under the GFDL.

The model

Physiocratic interpretation

Legacy

Further reading

External links