The French Physiocrats on Natural Order

The French Physiocrats -- just as much as Adam Smith et al. -- founded modern Economics. They had an odd theory of value, but their major contribution was to argue for individual freedom in economics.

Theory of Value:  Most physiocrats thought that natural-resources were the only fundamental economic value. When fruit grows on a tree, we can see the physical values appear in physical form. Or, we can visit a mine and see the a value like coal. However, using a very physical concept of value, the physiocrats could not see the value in transformation.  When the farmer picks the fruit off a tree  or when a carpenter assembles a table, they saw a rearrangement of value rather than a creation of new value. (In contrast, Adam Smith thought labor was the fundamental source of real value, and this too is wrong. It took the Utilitarians to come up with the notion that the valuer must be considered too.)

Not "social contract": The Physiocrats objected to the subjectivity of the concept of "social contract". Advocates of "social contract" said that man-the-savage gave up some of his freedoms, and submitted to society's laws, entering into a "social contract" that binds him to obey. However, any deprivations of legitimate rights can be justified as being part of a "social contract". We need a more objective principle. Even if we use "contract" as a metaphor, it can never be a  primary justification for a law. A law is not legitimate because it is part of a "social contract", but only because it best upholds individual freedom: rights to life, action and property.

Natural order: The chief counter-hypothesis offered by Physiocrats was the notion of "natural order".  They claimed that there was a "natural order": rules and laws that would allow people to live together in society while not giving up significant freedoms. The task of political science was to discover this natural order. The razor was: protect freedoms to the maximum while enabling people to interact in society. 

The Invisible Hand: The Physiocrats groped for a concept like Adam Smith's "invisible hand" to show that individual pursuit of selfish happiness was compatible with an ideal state.  "the desire for joy... drives itself toward the realization of the ideal type of state" (Mercier de la Rivière). If true, it would reconcile their moral goal (the ideal state) with common practical goals (joy). It is a true proposition in a very broad sense that free-markets create the richest societies. However, it is also a dangerous proposition that puts the state and common-good first, and it led generations of economists down the wrong road, and ended up undermining the free-market that it set out to justify.

Summary: The Physiocrats had a quaintly physical theory of value. Their inability to step away from their basic altruistic moral code placed economics on a shaky moral foundation, and their disciples compounded this further. Nevertheless, the Physiocrats were early innovators who contributed to the foundation of Economics and who advocated for more open markets. For more details, see: A History of Economic Doctrines... Gide, Charles