Entrepreneurship, knowledge and employment

A thousand men and a calf: William Petty’s two theories of distribution in their biographical background

Goodacre Hugh, Senior Lecturer

The approach to distributional issues most closely associated with English-language classical political economy centres on the idea that the laboring population produces a surplus over and above its own subsistence needs, and that political economy should consequently be focused on what Adam Smith calls “the order according to which its [i.e. labor’s] produce is naturally distributed among the different ranks of the people”. But interwoven with this in Smith’s work is a logically and theoretically incompatible approach which prefigures that of today’s microeconomics, in which the distribution of the economy’s output is addressed in terms of ‘factor rewards’: each ‘factor of production’ – capital, land and labor – receives its respective revenue – profit, rent and wages – and these revenues reflect, in the first instance, the factor’s contribution to output. Both these approaches may be discerned in the writings of William Petty (1623-87), but not in the simultaneous and confused entanglement in which they appear in Smith’s Wealth of Nations; rather, they are each found the context of a separate and contrasting phase of Petty’s eventful life. This provides an opportunity for the contradiction between the two approaches to be explored not just in logical terms, but in respect of their respective motivation, and their analytical strength in confronting the different issues they were forged to address. This, in turn, provides new insights into how and why the definitive rupture between adherents of these two approaches eventually came about, leading to the split into opposed schools of thought which persists to the present day.

Area:

Keywords: William Petty, Distribution, Labour theory of value, Factors of production

Paper file