Economist, born in Romsey, Hampshire, S England, UK. He went to sea, then studied medicine at Leyden, Paris, and Oxford. He taught anatomy at Oxford, and music at Gresham College, London. Appointed physician to the army in Ireland (1652), he executed a fresh survey of the Irish lands forfeited in 1641, and started ironworks, lead-mines, sea-fisheries, and other industries on estates he bought in SW Ireland. He was made surveyor-general of Ireland by Charles II. His most significant economic work was Treatise on Taxes (1662).
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Western Philosophers 18th-century philosophy (Modern Philosophy) |
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| William_Petty | |
| Name: | William_Petty |
| Birth: | May 27, 1623 |
| Death: | December 16, 1687 |
| School/tradition: | Classical economics |
| Main interests: | Political philosophy, ethics, economics |
| Notable ideas: | Division of labour, the growth of London, economic statistics |
| Influences: | Aristotle, Hobbes, Francis Bacon |
| Influenced: | Mandeville, Adam Smith |
Sir William Petty (May 27, 1623 – December 16, 1687) was an English economist, scientist and philosopher.
He was Member of the Parliament of England briefly and was also being a scientist, inventor, and entrepreneur, and was a charter member of the Royal Society. He was the great-grandfather of William Petty Fitzmaurice, 2nd Earl of Shelburne &
Life & influences
William Petty was born in Romsey on the 26th of May 1623 to a family of middle income, his father being a Hampshire clothier, as was his grandfather.
After an uneventful period in the Navy, he left to study in Holland in 1643, an exile of the English Civil War, and developed an interest in anatomy.
In 1652, he left on a leave of absence and travelled with Oliver Cromwell's army in Ireland, as physician-general. This enormous personal advantage to Petty led to persistent court cases on charges of bribery and breach of trust until his death.
Now back in England, as a Cromwellian supporter, he ran unsuccessfully for Parliament in 1659 for West Looe. This year also saw him write his first work on economics, his Treatise of Taxes and Contributions. Petty counted among his many scientific interests naval architecture: he had become convinced of the superiority of double-hulled boats, although they were not always successful;
The events that took him from Oxford to Ireland marked a shift from medicine and the physical sciences to the social sciences, and Petty lost all his Oxford offices.
He regarded his life in bittersweet terms.
He is most well known for economic history and statistic writings, pre-Adam Smith. Of particular interest were Petty's forays into statistical analysis. Petty's work in political arithmetic, along with the work of John Graunt, laid the foundation for modern census techniques.
Economic works and theories: overview
Before discussing Petty's economic theories, it is important to point out two crucial influences in his life. The first is Thomas Hobbes, for whom Petty acted as personal secretary. As Hobbes had centred on peace, Petty chose prosperity.
Secondly, the influence of Francis Bacon was profound. This passion for accuracy led Petty to famously declare that his form of science would only use measurable phenomena and would seek quantitative precision, rather than rely on comparatives or superlatives, yielding a new subject that he named political arithmetic. Petty thus carved a niche for himself as the first dedicated economic scientist, amidst the merchant-pamphleteers, such as Thomas Mun or Josiah Child, and philosopher-scientists occasionally discussing economics, such as Locke.
He was indeed writing before the true development of political economy. Nonetheless, Petty wrote three main works on economics, ‘Treatise of Taxes and Contributions’ (written in 1662), ‘Verbum Sapienti’ (1665) and ‘Quantulumcunque concerning money’ (1682), all refreshingly concise. These works, which received great attention in the 1690s, show his theories on major areas of what would later become economics. What follows is an analysis of his most important theories, those on fiscal contributions, national wealth, the money supply and circulation velocity, value, the interest rate, international trade and government investment.
Fiscal contributions
Fiscal contributions were of prime concern to policymakers in the 17th Century, as they have remained ever since, for the wise country would not spend above its revenues. By Petty’s time, England was engaged in war with Holland, and in the first three chapters of Treatise of Taxes and Contributions, Petty sought to establish principles of taxation and public expenditure, to which the monarch could adhere, when deciding how to raise money for the war. Petty lists six kinds of public charge, namely defence, governance, the pastorage of men’s souls, education, the maintenance of impotents of all sorts and infrastructure, or things of universal good.
On the issue of raising taxes, Petty was a definite proponent of consumption taxes. A vital aspect of economies at this time was that they were transforming from barter economies to money economies. Linked to this, and aware of the scarcity of money, Petty recommends that taxes be payable in forms other than gold or silver, which he estimated to be less than 1% of national wealth. To him, too much importance was placed on money, 'which is to the whole effect of the Kingdom… not [even] one to 100'.
National Income Accounting
In making the above estimate, Petty introduces in the first two chapters of Verbum Sapienti the first rigorous assessments of national income and wealth. Petty produces estimates, some more reliable than others, for the various components of national income, including land, ships, personal estates and housing. The discrepancy between these flows and his estimate for national income (£40m) leads Petty to postulate that the other £25m is the yield from what must be £417m of labour stock, the value of the people.
Money Supply & the Velocity of its Circulation
This figure for the stock of wealth was contrasted with a money supply in gold and sliver of only £6m. Petty believed that there was a certain amount of money that a nation needed to drive its trade. Hence it was possible to have too little money circulating in an economy, which would mean that people would have to rely on barter. It would also be possible for there to be too much money in an economy.
The answer for Petty lay in the velocity of money’s circulation. Anticipating the quantity theory of money often said to be initiated by John Locke, whereby Yxp=MSxxv, Petty stated that if Y was to be increased for a given money supply, 'revolutions' must occur in smaller circles (i.e. He explicitly states in Verbum Sapienti nor is money wanting to answer all the ends of a well policied state, notwithstanding the great decreases thereof which have happened within these Twenty years (p. He also mentions that there is nothing unique about gold and silver in fulfilling the functions of money and that money is the means to an end, not the end itself: 'Nor were it hard to substitute in the place of Money [gold and silver] (were a comptency of it wanting) what should be equivalent unto it. For Money is but the Fat of the Body-Politick, whereof too much doth often hinder its agility, as too little makes it sick... so doth Money in the State quicken its Action, feeds from abroad in the time of Dearth at home.' (Hull 1899: p.113) What is striking about these passages is his intellectual rigour, which put him far ahead of the Mercantilist writers of earlier in the Century.
Theory of Value
On value, Petty continued the debate begun by Aristotle, and chose to develop an input-based theory of value: all things ought to be valued by two natural Denominations, which is Land and Labour (p.
The Interest Rate
The natural rate of rent is related to his theories on usury. Petty also involved himself in the debate on usury and interest rates, regarding the phenomenon as a reward for forbearance on the part of the lender. Incorporating his theories of value, he asserted that, with perfect security, the rate of interest should equal the rent for land that the principal could have bought - again, a precocious insight into what would later become general equililibrium findings. Having established the justification for usury itself, that of forbearance, he then shows his Hobbesian qualities, arguing against any government regulation of the interest rate, pointing to the 'vanity and fruitlessness of making civil positive laws against the laws of nature' (p.
Laissez-faire governance
This is one of the major themes of Petty’s writings, summed up by his use of the phrase vadere sicut vult, whence we get laissez-faire. As mentioned earlier, the motif of medicine was also useful to Petty, and he warned against over-interference by the government in the economy, seeing it as analogous to a physician tampering excessively with his patient. He applied this to monopolies, controls on the exportation of money and on the trade of commodities. In another work, Political Arithmetic, Petty also recognised the importance of economies of scale. Petty said that the gain is greater 'as the manufacture itself is greater'.
Foreign Exchange & Control of Trade
On the efflux of specie, Petty thought it vain to try and control it, and dangerous, as it would leave the merchants to decide what goods a nation buys with the smaller amount of money.
On prohibiting imports, for example from Holland, such restrictions did little other than drive up prices, and were only useful if imports vastly exceeded exports. Petty saw far more use in going to Holland and learning whatever skills they have than trying to resist nature.
Full Employment
The goal of full employment was of most importance to Petty, having recognised that labour was one of the major sources of wealth for individuals and 'the greatest Wealth and Strength of the Kingdom'. In this vain, he extended the cloth-wine argument above, arguing that it is better to employ men and burn their product or to engage in extravagant public works projects, than to have indolent 'supernumeraries' in an economy - hence his famous example of relocating Stonehenge across the plains of Salisbury.
He used a powerful example to support his case. For Petty, the answer lay not in begging or in charity, which he famously called 'fallacious tenderness', but in public employment.
Division Of Labour
Petty made a practical study of the Division of labour, showing its existence and usefulness in Dutch shipyards.
Petty also applied the principle to his survey of Ireland.
Urban Society
Petty projected the growth of the city of London and supposed that it might swallow the rest of England--not so far from what actually happened: "Now, if the city double its people in 40 years, and the present number be 670,000, and if the whole territory be 7,400,000, and double in 360 years, as aforesaid, then by the underwritten table it appears that A.D. (OF THE GROWTH OF THE CITY OF LONDON - among the essays downloadable at the Guttenberg link.)
He imagined a future in which "the city of London is seven times bigger than now, and that the inhabitants of it are 4,690,000 people, and that in all the other cities, ports, towns, and villages, there are but 2,710,000 more."
Summary & Legacy
The above shows the contribution Petty made to theoretical issues that have dominated the later subject of economics ever since. The issues that Petty thought about and wrote are major topics that have plagued the minds of economic theorists ever since.
He influenced not only immediate successors such as Richard Cantillon but also some of the greatest minds in economics, including Adam Smith, Karl Marx and John Maynard Keynes. Furthermore, Smith and Petty developed labour theories of value, as did Karl Marx in the 19th Century.
Smith says nothing about Petty in The Wealth Of Nations. In his published writings, there is nothing apart for a reference in a letter to Lord Shelburne, one of Petty's aristocratic descendants (Correspondence Of Adam Smith, Letter No.
Petty continued to exercise influence. Karl Marx believed, as did Petty, that the total effort put in by the aggregate of ordinary workers represented a far greater contribution to the economy than contemporary thought recognised. This belief led Petty to conclude in his estimates that labour ranked as the greatest source of wealth in the kingdom. He showed how governments could manage aggregate demand to stimulate output and employment, much as Petty had done with simpler examples in the 17th century.
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