New Thinkers Emerge: The Physiocrats

A group of French thinkers, lead by Francois Quesnay, emerged in the mid 18th century to challenge existing Mercantilist ideas and to redefine wealth and economic growth. These were the Physiocrats; they viewed wealth as agricultural goods, introducing the principle that world wealth is not fixed. This extended into the radical idea that in any given exchange, all participating countries benefit, although not always equally.
The Physiocrats opposed Mercantilist trade restrictions because the tariffs hurt agricultural profits and overall, diverted investment from agriculture to manufacturing. In his Tableau Economique, Quesnay describes the key factor for economic growth: the "exclusive productivity of agriculture." The only way to change the total wealth of the nation is to change agricultural productivity. He divided the economy into three distinct sectors: 1) the productive class(farmers, miners, and fisherman, ie individuals who contribute to the total wealth of the nation), 2) the sterile class(merchants, manufacturers, and domestic servants), and 3) the landowner class.
In contrast to the Mercantilists, the Physiocrats waived heavy government intervention in the economy in favor of the "laissez faire" policy. The economy is largely self-regulating and would function better without the controls of the Mercantilist system.
The Physiocrats can be commended for introducing the concepts of a general economic equilibrium, tax shifting and tax incidence, and diminishing marginal product given a fixed input. They attacked the worst ideas of the Mercantilists: the Physiocrats identified national wealth with goods rather than specie, they promoted free international trade, and they argued against manufacturing monopolies.
And yet, the Physiocrats' outlook wasn't perfect either. They maintained the service and manufacturing sectors of the economy were "sterile" and did not contribute to national wealth. We now know that all production(goods and services) add to the wealth of a nation.