This thesis investigates the theoretical principles of the first school of economic thought, presented by its founder and major exponent, Francois Quesnay. The socio-historical background of Bourbon France is presented to show how Quesnay's position arose out of and was conditioned by this social environment, for Quesnay's theory represented an attempt to come to grips with and to resolve the economic and social problems of his time. The three major purposes of this thesis grow out of this exposition. The first purpose is to explicate Quesnay's theory. To do this it is necessary to resolve a number of problems arising from various interpretations of the zig-zag diagram and to outline Quesnay's meaning of disequilibrium. The first of these problems is the resolution of certain inconsistencies and ambiguities found in various interpretations of the zig-zag diagram of the "Tableau économique". By analyzing Quesnay's own explanation of this diagram, I have been able to construct a consistent and a comprehensive interpretation of the zig-zag diagram which is simple and is also in agreement with Quesnay's remarks. The most important conclusion to be drawn concerning the zig-zag diagram is that the figures represent solely the circulation of the monetary revenue. Any interpretations, therefore, that involve the physical productivity of the farmers and/or that deal with physical units are both superfluous and erroneous. Interpretations leading to the conclusion that the sums received by the farmers are "doubled" in their hands have confused physical productivity with the simple accounting devices of the "Tableau". The second problem investigated is Quesnay's meaning of disequilibrium. Closely associated is the explanation of Quesnay's special conception of hoarding and his static theory of money. Quesnay's theory of disequilibrium resulted in a unique type of underconsumption economics. From his theory of value, that only agriculture yields a surplus, he surmised that a shift of effective demand from the purchase of agricultural commodities to other commodities and a shift of capital from employment in agriculture to other employments would lead to a depression. This position later led J.B. Say to formulate his law of markets as an alternative to and a refutation of underconsumption economics. Say's law, paradoxically, was based on another physiocratic principle, circular flow. My second major purpose, therefore, is to investigate Quesnay's influence on the development of Say's law and to establish Quesnay's place in the history of economic thought. Quesnay observed that all societies have a common economic physiology whose character and operation lend themselves to standardized analysis both quantitative and qualitative. His use of models is significant, for it is this approach that permits economists to abstract from the whole congeries of human phenomena certain aspects called economic behavior, and to reduce the complexity of economic behavior to understandable associations and relationships. The third major purpose is to suggest some of the possible trends that might have occurred in economics had Quesnay's ideas been taken as the basis for this science. My conclusions are closely related to this purpose. Physiocracy was based on a philosophy of action. Quesnay developed a theory of depressions and linked the level of economic activity to the pattern of resource allocation. He took a macro-economic approach and seemed to be as impressed by science and technology as economists (particularly institutionalists) are today. Quesnay viewed economics as a pragmatic, normative social philosophy. If these "heterodox" ideas had been incorporated into economics from the start, the problems arising from the conception of the automatically self-regulating economy might have been avoided.