By Satyajit Mishra
William Petty was a man of many talents – A serial innovator, an accomplished doctor, a gifted craftsman and an unsung economist. William, the son of a tailor was born in England in 1623. He was an able smith, craftsman and joiner by the age of 12. By the age of 14 he was fluent in Latin, Greek and French and had a strong aptitude of mathematics and astronomy. He further went on to study Medicine at the University of Oxford and later became a professor of both anatomy and music by the age of 27. He later went on to become an army doctor in Ireland before finally stepping into civil service.
William spent two years making a land register for the whole of Ireland. After being able to chalk out a model to value land effectively for the register, he went into insurance and became a forerunner of modern insurance business. During this time he made several inventions- a patented double-writing instrument which put down an extra copy of whatever was written on a piece of paper, this was the very first version of a photocopier; a mechanical grain planter, to help diminish the usage of labour; and the process of attaching engines to boats. All this, in the first 35 years of his life.
By developing and altering different mathematical models, William continued to come up with many great ideas. In fact, William was the first person to find a method to measure GDP, find the true importance of banks and money supply, and why and how unemployment affects the economy.
Back in the 16th century, landowners in England faced high taxes. Petty found this practice unfair and had to explain why such a tax regime is flawed. To do this, Petty argued that total income must equal total spending. At that time 4.5 pence a day was enough to meet all living expenses and a population of 6 million meant spending was 40 million pounds a year. Next he calculated the income from assets such as land, ships, houses which gave him a total of 15 million pounds. Therefore, of the 40 million to be spent, 15million were from assets. The remaining 25 million were wages and therefore the tax burden should be borne by these 25 million pounds. In trying to prove his point, Petty had unknowingly created the concept of GDP.
William noticed that high interest rates were holding back trade in Ireland. To combat this problem, William developed the quantity theory of money- the core to modern economics. Petty calculated the money needed for all transactions in Ireland each year, the time it took for this money to circulate and an estimate of the amount of money needed to effectively keep interest rates under control. By doing so he was the first person to successfully link monetary policy in controlling interest rates.
Petty believed pointless work was better than no work at all. Unemployment would reduce mens facility to work and that deficient demand was a threat. In times of a slump, public investment could help offset it. This was centuries before John Maynard Keynes had proposed the same theory.
Petty was knighted Sir William Petty for his astounding and remarkable work, yet as an academician he was never truly appreciated. This is because he put data in everything he worked with, and was the only person to use data with economics at that time. Sadly, these models gave different results in the next century and his work slowly died. He was labelled as a person of influence but not the founder of economics. Nevertheless, Sir William Petty influenced all the greatest minds of Economics, including Adam Smith, Karl Marx and John Maynard Keynes.
An unsung hero, the true father of Economics.
Currently in 3rd year of B.Com under Calcutta University specializing in accounting and finance. Also pursuing Chartered Accountancy. Reading research and analysis of the global economy, political matters that influence our economic decisions, game theory and strategies in war, strategy formulation and implementation and contemporary issues in marketing interest him a lot.