Sir William Petty, 1623-1687.

English Mercantilist, founder of "political arithmetic"

William Petty, "the most rational man in England", as Samuel Pepys called him, or a "frivolous, grasping, unprincipled adventurer" as Karl Marx (1859) preferred,  was born the son of a clothier in Romsey, Hampshire.  Petty's early education was rather spotty until he ran away from home and took up as a job as a cabin boy on a merchant vessel at the age of 13.  Petty broke his leg aboard ship the very next year and, as per the custom of the time,  was marooned on the coast of Normandy.  The injured boy was picked up by French Jesuit clerics who, impressed by his intelligence, admitted him to their college in Caen, paying for his upkeep themselves.  The better part of Petty's education, particularly in mathematics, was acquired here.

William Petty eventually returned to England where, after working for a short spell drafting sea charts, enlisted for a stint in the Royal Navy in 1640.  In 1643, as the Civil War between King and Parliament raged, Petty joined the wave of English refugees in the Netherlands and thereafter France.  This was probably the most enchanted time of Petty's life.  He pursued a variety of endeavors, working for an optician in Amsterdam, studying anatomy at Leyden, and consorting with other exiled luminaries. Most notable was Petty's stay in Paris as private secretary to Thomas Hobbes, through whom Petty was introduced to the bubbling intellectual milieu of the French capital, most notably the circle of Abbé Mersenne.  It in during this sojourn that Petty absorbed the tidings of the scientific method and empiricism, which he would soon himself carry into economics.

In 1646,  Petty returned to England to put his late father's affairs in order.  After a failed attempt at selling his invention of a double-writing instrument, Petty gravitated to Oxford and continued his studies in medicine.  His resuscitation of the corpse of a young woman hanged for murder made him a bit of a local celebrity.  By 1650, Petty had become doctor of medicine, professor of anatomy,  fellow and vice-chancellor of Brasenose College, Oxford.  To this portfolio, he soon added (with the help of his haberdasher friend John Graunt) the chair in music at Gresham College in London (founded by Thomas Gresham back in 1597).  It was at Gresham that Petty fell in with a discussion group of young new scientists, notably  John Wilkins, Robert Boyle, Christopher Wren, John Wallis, Robert Hooke, et al. who jokingly called themselves the "Invisible College".

In 1652, Petty took leave from Oxford and traveled as a physician-general in Cromwell's army in Ireland.  The punitive Act of Settlement of 1652 confiscated the lands of all Irish combatants and shunted much of the remaining population to the province of Connaught, leaving most of Ireland open to English settlement. Cromwell intended to use Irish land to reward veterans of the parliamentary army in lieu of cash wages, but also to settle with parliamentary creditors and raise cash from sale to a wide variety of Anglo-Scottish colonist "adventurers". 

To this end, a comprehensive survey of the values of the confiscated estates was necessary.  One was already underway headed by the surveyor-general Benjamin Worsley.  But using the slow and painstaking means,  Worsley's survey would likely take 13 years to complete.  Petty, drawing on his practical experience with nautical charting, openly criticized Worsley's methods and proposed he could do it better and faster.  Finally, in December 1654, after enough politicking, the young doctor was given the contract to survey the army lands himself.  Using thousands of unemployed soldiers, rather than just a handful of skilled surveyors, and setting down the results by a central stable of cartographers assembled in Dublin, Petty finished the task of surveying half of Ireland - the notorious "Down Survey" - in a stunningly rapid 13 months.  Petty's Down Survey was to continue serving as the legal reference for land disputes in Ireland well into the 19th C.

Petty made a fortune for himself in the process.  The poor clothier's son would end up with vast lands of his own across Ireland - according to Aubrey, some 50,000 acres, much of it around Kenmare, County Kerry, yielding an annual income of 7,000 to 8,000 pounds. This princely wealth he partly earned as a reward for his efforts in composing the survey.   The remainder he acquired while subsequently serving on the commission to distribute the land parcels among the veterans. This perch opened great avenues to private enrichment for himself and his cronies. Petty sealed numerous personal deals with soldiers who preferred to be bought out rather than wait to take possession of their land (and who knew the true value of these parcels of land better than Petty himself?). 

Petty was subject to vicious accusations of corruption, fraud and malfeasance in the settlement of Irish army land.  A good part was undoubtedly true.  But much of it was also driven by the political rivalry between Henry Cromwell (the Lord Protector's son and Petty's close companion) and the ambitious Lord Deputy of Ireland, Charles Fleetwood (whose base was in the more radical republican camp in the army).  Petty was thus a natural lightning rod of criticism by a military party suspicious of the aggrandizing pretensions of the Cromwellian clan.

The accusations reached a crescendo in 1658, after the death of mighty Oliver Cromwell.  The controversial ascendancy of his son Richard Cromwell reanimated the army's dormant republicanism.  When Petty was on a mission in London, the army officers in Ireland forced the weakened Henry Cromwell to reluctantly open an inquiry into Petty's affairs. But Petty persuaded Cromwell to pack the commission with his friends, and the army officers were unable to push a conviction.  In the meantime, Petty himself had successfully run for parliament for the seat of West Looe and moved back to England.  But his entry into Parliament was met by a renewal of the accusations, this time proffered by an army preacher, Sir Jerome Sanchey, on the floor of the House of Commons. But before this was resolved, parliament was dissolved in the political chaos that was rapidly enveloping England.  To clear his name, Petty felt compelled to put the details of this controversy before the public in print (1659, 1660).    

In 1660, the army revolt collapsed and the Commonwealth  gave way to the restoration of the Stuart monarchy under Charles II. Both Henry Cromwell and Petty, who had long been at odds with the army, rendered critical services to the royalists in these heady days.  The new king Charles II was grateful and allowed Cromwell to retire gracefully and gave Petty entry into his court.  Petty rapidly won the confidence of the Stuart king, who bestowed a knighthood upon the clothier's son  in 1661.  Peerages were also offered, but Petty turned them down, seeing them as attempts to fob off his petitions to secure a real government post with policy influence - "sooner be a copper farthing of intrinsic value than a brass half-crown, how gaudily soever it be stamped or gilded", he muttered.

Ideas - policy and otherwise - was something Petty was brimming with at this time.  Splitting his time between Oxford and London, Petty resumed his participation in the "Invisible College" of Boyle, Wren, Wilkins et al. which by 1662, had the king's approval and a royal charter of incorporation as the "Royal Society of London for the Improvement of Natural Knowledge".  One of  Petty's more interesting endeavors at this time was the invention of a double-bottomed vessel, a prototype of which he gave King Charles II (eventually lost at sea), and a model of which was given to the Royal Society. 

It was at this height that Petty published his first economic tract, the Treatise on Taxes and Contributions (1662) (initially published anonymously but authorship finally confirmed  publicly in 1685). Intended as a policy manual to increase royal revenues,  it was full of proposals for tax reform, trade policy and (something dear to his heart) the organization of a royal statistical agency which, naturally, Petty hoped to head himself. 

The great innovation in this work was Petty's articulation (some say the first discovery) of the concept of the economic "surplus" and the labor theory of value.  Petty came up with is in the process of coming to grips with the "mysterious nature" of land rents.  A century before the Physiocrats, Petty eschewed characterizing rent as a cost, but rather saw it as a deduction from the surplus or net product (which he simply labels "Rent") of output after deducting the needs to sustain the labor and capital for next year's production. ("I say, that when this man hath subducted his seed out of the proceed of his Harvest, and also, what himself hath both eaten and given to others in exchange for Cloths, and other Natural necessaries; that the remainder of Corn is the natural and true Rent of the Land for that year" (Petty, 1662 [1889: I, p.43]).  This is how Petty set up the first model of Classical reproduction.  [Petty approaches but does not quite hit on a differential theory of rent in his explanation of how proximity to market generates differences in rents.]

Petty gropes onward towards a theory of value by positing the equivalence of the labor time and effort to produce this agricultural surplus with the amount of (surplus) money (that is, silver) that can be produced with the same labor time and effort. ("how much English money this Corn or rent is worth? I answer, so much as the money another single man can save, within the same time, over and above his expense, if he employed himself wholly to produce and make it" (1662: p.43)).  So if the labor time to produce a silver shilling is equal to the labor time to produce a bushel of corn, then the value of a bushel is a shilling, and the value of a shilling is a bushel, "one is the natural price of the other" (Petty, 1662: p.50).

In short, relative values are determined by relative labor time expended in their production.  Petty recognizes this labor value is not exact, that actual market prices can deviate from it incidentally: "This I say to be the foundation of equallizing and balancing of values; yet in the superstructures and practices hereupon, I confess there is much variety, and intricacy" (p.44). 

Petty goes far enough out to explain the simple gravitational dynamic: if market values are not equal to labor-time values, then the producer of the underpriced commodity loses labor-time by exchange, and will find it to his advantage to concentrate his labor on producing the overpriced good. The consequent relative changes in supply will raise the price in the former and lower the price in the latter until market values equal intrinsic labor-time values again. 

Petty departs from other writers of the Mercantilist age in viewing a nation's wealth as the real resources of the country, rather than in accumulated gold and silver. But, like other Mercantilists, he was concerned with the power of the monarchical state and consequently the efficient taxation of real wealth.  In his Verbum Sapienti (written c.1664/5 but left unpublished until 1691), Petty makes his first attempt at estimating the real wealth and income of England, a follow-up on his concern with the taxable base.

Petty measures national income by the expenditure method - which he obtains by calculating the amount spent per person and multiplying that by the estimated number of people. Petty estimates that the population is about 6 million, and since the average person spends 4.5d per day on "Food, Housing, Cloaths, and all other necessaries" (Petty, 1665 [1899, p.107]), total expenditure adds up to £40 million per annum.  On the income side, he calculates land yields up £8 million and other estates £7 million,  implying (residually) that labor income must come to £25 million if income and expenditure are to be equated (p.108).  Besides the unsatisfactory lack of independent statistics for labor income, it did not occur to him that he was only measuring consumption expenditure and had overlooked the important category of investment expenditure on capital  This would later be corrected by his disciples Gregory King and Charles Davenant.

Turning then to stocks, Petty attempts not only to measure the material wealth of the nation, but also its "population-wealth", that is the monetary value of the population itself (what can be interpreted as the monetary value of the productive capacity of the population).  By Petty's calculation, the material wealth of England at about £250 million and added upon that the "population-wealth" at a further £417 million (that is, £69 per head).  He obtains the latter from reasoning proportionally about income per wealth and the residual calculation of labor income (i.e. Petty stipulates £15/£250 = £25/(population wealth), thus deduces population wealth = £417).

From this Petty's concludes that labor ("people considered without any estate at all", p.110) is undertaxed, and that the tax burden between estates and people should be apportioned 3 to 5 (as per the income ratios).  He goes on to calculate that if laborers worked a little harder and ate a little less, they could afford to pay the income tax necessary to fulfill their share of the tax burden.

Petty unambiguously viewed a large population as a good thing ("Fewness of people, is real poverty" (1662 [1899: p.34])).  The natural policy question is consequently how to generate more labor.  Contrary to the Malthusian or utilitarian dynamics, Petty did not believe higher wages led to greater labor supply.  On the contrary, he sees only the backward-bending income effect: "It is observed by Clothiers, and others, who employ great numbers of poor people, when Corn is extremely plentiful, that the labour of the poor is proportionally dear; and scarce to be had at all (so licentious are they who labor only to eat, or rather to drink." (Petty, 1676 [1899: p.274]).  Consequently wages should not be high, but only just enough to allow workers to "Live, Labour and Generate" (Petty, 1672 [1899: p.181]).

Although Petty suffered some losses through the Court of Innocents of 1662, his ownership of vast possessions in Ireland had been largely confirmed at the Restoration.  But the 1666 Court of Claims opened the issue again, and Petty felt compelled to interrupt his scientific and courtly endeavors and return to Dublin to defend his claims. 

Petty returned to political economy in the 1670s, after he was called upon by Edward Chamberlayne for help in assembling materials on Ireland for a new edition of Chamberlayne's book, The Present State of England.  Petty's endeavors led to the composition of his own tract, The Political Anatomy of Ireland (1672, published 1691), followed up by a similar exercise for England, the famous Political Arithmetik (1676, published 1690).  It is in the preface to the latter that he makes his famous pronouncement in favor of scientific reasoning in economics:

The Method I take to do this, is not yet very usual; for instead of using only comparative and superlative Words, and intellectual Arguments, I have taken the course (as a Specimen of the Political Arithmetick  I have long aimed at) to express my self in Terms of Number, Weight, or Measure; to use only Arguments of Sense, and to consider only such Causes, as have visible Foundations in Nature; leaving those that depend upon the mutable Minds, Opinions, Appetites, and Passions of particular Men, to the Consideration of others: (Petty, 1676 [1899: p.244])

Petty's Political Arithmetik (1676) attempts to compare the income and wealth of France, the Netherlands and Britain.  Calculating that France has 13 times the population and 80 times the land of the Netherlands, but only 3 times the income, Petty  proceeds "to shew that this difference of Improvement in Wealth and Strength, arises from the Situation, Trade, and Policy of the places respectively; and in particular from Conveniencies for Shipping and Water Carriage." (p.255).  Petty runs over some of the advantages of the Netherlands over France, which include geography(esp. waterways), national characteristics (work ethic, liberty of conscience), property rights (registries), banking and the Mercantilist policies of the Dutch Republic. 

(Petty repeats the statistical exercise of 1665 (Petty (1676 [1899: p.]) calculating British income at £42, £16 in rents and profits, £26 in labor income, material wealth at £320 and population wealth at £520)

Petty refrained from printing the Political Arithmetik.  It was privately circulated in manuscript form, and, in 1683, published anonymously without his consent under a different title.  It was only in 1690, after the Glorious Revolution and Petty's own death, that his family saw fit to finally publish it together with his anatomy of Ireland.  Petty's reticence was based on the book's consequences for foreign policy.  The Stuart monarchs, goaded by the Mercantilists, had pursued an actively hostile stance towards the nimble commercial republic of the Netherlands, and to this end, had cultivated an alliance with France.  But Petty, never much impressed by commercial wealth, diminished the importance of the Dutch competition with England.  It was France, and her vast real resources in land and people, that Petty feared to be the real danger. Consequently, his Political Arithmetik reeked with alarmist notes on the French "threat" to Britain. But so long as the Stuart kings were allied with France (indeed, receiving secret subsidies from the French monarch), Petty thought it unwise to embarrass them (and reap court disfavor for himself) with such a Gallophobic tract.

In 1685, Petty retired to his lands in Ireland, and died two years later. A pupil of Hobbes, Petty was a Mercantilist in his policies, but one can find rudiments of the labor theory of value and thus is often regarded as a precursor of the Classical School. He was particularly influential upon Davenant and Locke.

[In 1662, Petty's friend John Graunt published his Natural and Political Observations....Upon the Bills of Mortality, laying out the foundations for demographic and social statistics.  The tract was widely assumed to be Petty's own, a misattribution that some historians have since perpetuated.   There is now little doubt it was genuinely Graunt's, although the project may very well have been proposed and outlined to him by Petty. ] 

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