Of all the economists contemporary with Locke, Sir William Petty was, in many ways, the most remarkable. Circumstances made him acquainted with France, Holland and Ireland. He studied medicine in Holland; in France he became intimate with Hobbes; an appointment as army physician in Ireland, under the lieutenant-governorship of Henry Cromwell, led to his undertaking the “Down survey” of forfeited lands, and thus determined both his own fortunes and the character of his literary work. His type of mind inclined him to experimental work and to the exact sciences; and, as experiment is seldom possible in economic affairs, he found a substitute for it in what is now called statistics. This he himself styled “political arithmetic”: “instead of using only comparative and superlative words, and intellectual arguments,” he states his intention to “consider only such causes as have visible foundations in nature,” and to express himself “in terms of number, weight, or measure.” Thus he adopted the quantitative method, and applied it to a variety of topics. At the time, there were many complaints of national decay; Britannia languens was vocal; rents (it was said) were falling; money was scarce; trades were disappearing; the country was underpeopled; and the people underemployed and overtaxed. Petty did not sympathise with these complaints; he distrusted vague generalities, and asked for exact statements of the resources of England as compared with those of her rivals. The net results of his own enquiry into the matter are given in his Political Arithmetic. It was characteristic of Petty to look facts in the face, without being too much overawed by the prevalent assumptions of statesmen and men of business. He did not share the fears of the mercantilists regarding the danger of exporting the precious metals: the country, he thinks, is not always the poorer for having less money. On the subject of money, he gives two definitions which are worth quoting. Interest is “a reward for forbearing the use of your own money for a term of time agreed upon”; similarly, Exchange is “local interest, or a reward for having your money at such a place where you most need the use of it.” The sentence “labour is the father and active principle of wealth, as lands are the mother” occurs in his Treatise of Taxes, but is not introduced as original on the author’s part.
Locke’s own contributions to economics were occasioned by the financial problems which faced the new government after the revolution. His reflections on the rate of interest show the growing disfavour with which appeals for state interference were beginning to be met. He points out the obstacles to trade that are caused when the rate of interest is fixed by law, and he argues in favour of freedom for what he calls, in words which suggest Adam Smith, “the natural interest of money.” Money “turns the wheels of trade”; therefore its course should not be stopped. At the same time, he holds no general brief against the interference of the state in matters of commerce; nor is the language of the mercantilists foreign to him. Riches consist in plenty of gold and silver, for these command all the conveniences of life. Now, “in a country not furnished with mines, there are but two ways of growing rich, either conquest or commerce.” For us commerce is the only way; and Locke condemns “the amazing politics of some late reigns” which had “let in other competitors with us for the sea.” In the concluding portion of Some Considerations, dealing with the currency, Locke laid stress on the importance of a uniform and stable measure of values; four years later, in his Further Considerations, he defended his view against the proposals, involving a depreciation of the standard, which William Lowndes, secretary of the treasury, had set forth in An Essay for the amendment of the silver coins (1695).