A Physiocratic Model of Dynamic Equilibrium

Abstract

Ever since Karl Marx's rediscovery of the Physiocrats, Francois Quesnay's Tableau e'conomique has received a deserved measure of attention and appreciation. The Tableau illustrates the circular-flow principle, gives emphasis to the interdependence and interaction between income and expenditures, and draws attention to capital as the basic factor of production. Despite the fact that Quesnay has long been recognized as the first important economist to have examined capitalist production, scant attention has been given to the capital structure of his Tableau. It is the purpose of this paper to show that the numerical values assigned to key variables in Quesnay's model can be used to reconstruct the capital structure underpinning the Tableau. This new approach to Physiocratic theory provides a solution to some important problems connected with interpreting the Tableau and other aspects of Physiocratic analysis. Perhaps most important, it provides a basis for specifying the production functions in the Tableau and permits the construction of a Physiocratic model of dynamic equilibrium.