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August 23, 2013

Historical Echoes: It Wasn’t Brain Surgery - It Was the First Economic Table

Amy Farber

François Quesnay, an eighteenth-century brain surgeon and physician to France’s King Louis XV, was also the first to put economic data into a table. He became interested in economics while serving the king at Versailles. Quesnay led the physiocrats, the first economic school of thinking and supporters of a reduction in taxes on agriculture and of relatively laissez-faire policy. In 1758, he wrote Tableau Oeconomique (Economic Table - the table itself appears on Roman numeral p. x), which explores the relationship between economic classes. (You can view the tabular part of the original manuscript of the Economic Table on the Archives de France website and a larger image here.)

     Quesnay endeavored to prove that the economic misery of the people might be relieved by measures that should at the same time improve the royal finances (at the time, France’s finances were a wreck due to the reign of the previous king, Louis XIV).

     According to the English-language preface written in the 1894 edition (linked to above):

The nation, Quesnay thought, should cease to live upon its capital to the detriment of efficient production, and a greater portion of wealth should be devoted to the support of agricultural industry . . . a smaller to such relative superfluities as decoration . . . while a more equitable and economical principle of taxation should be adopted . . . . The economic activities of the nation freed from their former shackles were to be allowed free play . . . . The statesman’s rule of thumb was to be laissez-faire; and his danger-post was, in the words of Quesnay’s motto, pauvres paysans, pauvre royaume; pauvre royaume, pauvre roi.

     That’s “poor farmers, poor kingdom; poor kingdom, poor king.” It was Quesnay who coined the term “laissez-faire.”

     According to the same introduction, the economic table works in the following way:

The Tableau Oeconomique essays, by analysis of the circulation of wealth, to shew the importance of wise consumption in the accumulation of reproductive capital. It is assumed that agriculture . . . yields a return of 100 per cent. The further hypothesis is adopted of an equal division of expenses into those which are “productive” and those which are not, and the continued reproduction of the productive expenses is shewn on the left of the table, the successive sections of unproductive expenses on the right. If the hypothesis be modified so as to allow the right hand column to preponderate at the expense of the left “it is seen that an opulent nation may very rapidly be ruined by . . . excessive luxury of decoration.” Conversely a preponderance on the left will increase the national resources.

     A helpful six-and-a-half-minute slide presentation from George Mason University’s Mercatus Center explains the economic table further:

The Tableau . . . a somewhat strange zig-zag diagram but basically the zig-zags are tracing the flow of funds through an economy and the diagram is intended to be used for what we would now call comparative statics—that is, you would introduce some change in funds or economic activity at some point in the diagram and then, by following the zig-zags, you would trace how this would affect the overall economy.

     According to that presentation, Quesnay’s writings introduced the macroeconomic idea of an economy as a circular flow; influenced Anne-Robert-Jacques Turgot, Adam Smith, and Karl Marx; and fed into modern economic tools like input-output tables, computable general equilibrium models, and the idea of the economy being something computable. In addition, Quesnay proposed a single tax on land, an idea that became quite influential and that economists still view favorably. The narrator suggests that Quesnay’s familiarity with the human circulatory system probably fed into his characterization of funds flowing through an economy.

     A blog post by an economics professor/blogger contains an interesting discussion of the Tableau Oeconomique, explains the economic classes envisioned by Quesnay, and provides an easier-to-read, modern rendering of Quesnay’s table.

     What kind of brain surgeon could Quesnay possibly have been in the mid-1700s? According to the abstract for a 1985 article in Neurosurgery, “Francois Quesnay and the birth of brain surgery”:

Quesnay, still famous as economist and as the founder of one of the earliest systems of economics, is largely forgotten as a surgeon, although he was the first to advocate cortical incision and exploration of the brain for abscesses and tumors.

The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

Amy Farber is a research librarian in the Federal Reserve Bank of New York’s Research and Statistics Group.

Posted by Blog Author at 07:00:00 AM in Historical Echoes

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