Historical analysis of Sir William Petty's economic theories and early concepts of human capital

Ireland as chief medical officer to Cromwell’s ironsides, stayed on to survey the Irish land with which Cromwell would pay his troops, and then got Parliament's approval to invest in that high-risk land to make a fortune. It is rare for a man of practical gifts to be a deep thinker too. Petty, like my father, was both. His Verbum Sapienti of 1664 was first to apply the ancient capitalization formula to both factors, meaning workers as well as tradeable things, and so originated the concept of human capital as present value. He applied this insight there and his Political Arithmetick in 1676, and again in The Total Wealth of England in 1683, to measure the total wealth of England including human capital. That makes him the father of national accounts. But his greatest achievements, I think came in A Treatise of Taxes. Chapter 4, paragraph 9 of that book begins with 19. Having found the Rent or value of the usus fructus per annum, the question is, how many years purchase (as we usually say) is the Fee simple naturally worth? If we say an infinite number, then an Acre of Land would be equal in value to a thousand Acres of the same Land; which is absurd, an infinity of unites being equal to an infinity of thousands. Petty clearly recognizes that time preference, meaning our taste for impatience, explains productivity, or ratio of output to capital, rather than the other way around. This powerful and counterintuitive insight is usually credited to Boehm Bawerk in 1889, who showed that it is true for man-made things as well as land. The utility or usus fructus being a given, we bid less for the land or other capital producing it if we are less patient, and more if more. Bidding less for this denominator of rate of return bids that rate itself up if the numerator is a given, and conversely. That’s why riskier assets offer higher return. Petty’s reductio ad absurdam of a hypothesis of infinite patience is obvious in hindsight, but may not have been written down before. Petty continues: Chapter 7 Petty’s Idea 2/3/16 14 HOUSE_OVERSIGHT_011073