Engels (Marx), then, sets out a brief summary of the Tableau. I have dealt with Marx's presentation of it, elsewhere.
“As is known, the physiocrats divide society into three classes: (1) The productive class, i.e., the class which is actually engaged in agriculture — tenant-farmers and agricultural labourers; they are called productive, because their labour yields a surplus: rent. (2) The class which appropriates this surplus, including the landowners and their retainers, the prince and in general all officials paid by the state, and finally also the Church in its special character as appropriator of tithes. For the sake of brevity, in what follows we call the first class simply “farmers”, and the second class “landlords”. (3) The industrial or sterile class; sterile because, in the view of the physiocrats, it adds to the raw materials delivered to it by the productive class only as much value as it consumes in means of subsistence supplied to it by that same class. Quesnay's Tableau was intended to portray how the total annual product of a country (in fact, France) circulates among these three classes and serves annual reproduction.” (p 314)
At this point, its worth summarising what was correct and what was wrong in the Physiocratic theory. What was right was that surplus product/value is created in production, and not in the process of exchange. In that revolutionary discovery, the Physiocrats were ahead of both the Mercantilists, and of today's, orthodox economists, be they neoclassicists, Austrians, Keynesians or post-Keynesians, all of whom see profit arising from the process of exchange, as a “consumer surplus”. Adam Smith recognised this leap forward, made by the Physiocrats, and it formed the basis of his theory, and that of the rest of the Classical School. Again, it put Smith ahead of the Mercantilists, and of the later schools of orthodox economists.
What was wrong with the Physiocratic theory was its explanation of the source of this surplus product/value, created in production. Because, contrary to Duhring, the Physiocrats were primarily concerned with the production and circulation of the physical product/use-values, in a country – France – where agriculture dominated production, their attention focused on the difference between physical inputs and physical outputs.
In agriculture, superficially, this seems obvious. A certain amount of seed corn is planted, a certain amount of corn is fed to the farmer/worker, to reproduce their labour-power. Let us say 1 ton as seed, 1 ton as food for the farmer/labourer. But, at the end of the year, 3 tons of corn are produced, a surplus product of 1 ton. Where has it come from? For the Physiocrats, it is obviously a free gift of the land. Marx sets out, in Theories of Surplus Value, Chapter 22, that Ramsay makes a similar error. In fact, even in terms of the physical product, the Physiocrats were wrong in thinking that the surplus arose out of nowhere, just from the land.
As well as the seed planted, the final output of corn involves a whole series of chemical processes, whereby other use-values – nutrients from the soil, water from rain, energy from sunlight – are incorporated in it. Its wrong, even on this basis, therefore, to say that the increase in the physical product arises from nowhere. It involves a whole series of processes whereby matter in one form is transformed into matter in a different form. It, also, involves a transformation of energy (sunlight, labour) into matter. So, Marx says, if all of these other use-values are taken into consideration, there is no magical increase in the total product, only a transformation of use-values in one form into use-values in a different form.
This is, in fact, entirely consistent with the laws of thermodynamics. An obvious illustration of this is to look at what happens during a drought. The land no longer magically produces a surplus product. Indeed, it may not even be able to reproduce the inputs themselves. The same is true, where there is not enough sunlight, or where the soil becomes depleted of nutrients. In these cases, rather than the land magically producing a surplus product, there may be negative reproduction. In other words, even restoring the initial scale of production may not be possible, or may require, if they exist, stocks to be used to restore that initial condition.
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