The Physiocratic Analysis of Money: A Reappraisal

Few studies have focused specifically on the physiocratic analysis of money. The physiocrats' position was based on their criticism of Law's system and more broadly on the role of finance. First, they rejected the idea that a large amount of money was the condition for the wealth of nations. Second, they rejected paper money, as well as any form of currency alteration. As a simple means of exchange, Quesnay and his followers recognized that money could be replaced by paper. However, in order to comply with the "value for equal value" principle of exchange, money had to be made of precious metals, as Le Trosne, the main architect of the physiocratic monetary doctrine, forcefully asserted. This doctrine of money created a tension: from the circulation perspective, money was not considered as a component of wealth and could be replaced by paper to simply represent flows in expenditure; but from the equality-of-exchange perspective, money had to be made of precious metals, thus becoming a storable asset in a portfolio. To overcome this tension, the économistes were to forcefully denounce hoarding and deny money the function of a store of value.