William Petty 1623-1687
Founder of political economy. Professor of anatomy and music, physician and landowner. Friend of Pepys and Evelyn. Discards mercantilist idea that wealth arises from exchange. Writes Political Arithmetick 1672, expresses himself in terms of 'number, weight or measure' founding statistical approach to analysis of political problems and urging collection of statistical information by the state. Economic works include A Treatise of Taxes and Contributions 1662 discussing public revenue and expenditure and means of taxation. Proposes rent tax. Prince should avoid extravagance and over-taxation so as not to damage economic activity, but can direct tax revenue to fostering industry and wider employment. Urges efficiency in state bureaucracy. In Verbum Sapienti 1664, and Political Anatomy of Ireland 1672, he identifies the first theory of value based on ideas in Treatise, recognising labour and land as source of wealth, in contrast with mercantilists who regarded treasure as source of wealth. But Petty confuses exchange value as arising only from labour and use value arising from both land and labour. He proposes advantages to the division of labour using watch-making as an example, thus foreshadowing Adam Smith's pin-making example (but of course ibn Khaldum had used the pin-making example several hundred years earlier). He defines the price of a commodity as the amount of money that could be produced by a labourer in the same amount of time taken to produce that commodity, i.e. a labour theory of value (meaning that 'value' is determined by the amount of labour). Petty says that labourers should be able to subsist on their wages and no more. Thus the value of labour is that required to pay labourers subsistence. Hence the idea that raising wages reduces the time that labourers spend working, thus reducing output, thereby indicating that raising wages is detrimental to output. The rent of land is said to be determined by price of land, according to Petty. The rate of interest is determined by the rent that could be achieved by using money to buy land instead of to lend at interest. Petty defines money supply and velocity of circulation and holds that they are important economic factors. In Quantulumcumque Concerning Money 1682, he emphasises the natural law against which the state should not legislate. Therefore he is against controls on export of bullion and foreign exchange rates and anticipates the free market approach of Smith. Nevertheless, Petty is in favour of running a trade surplus in order to 'bring home money', thus remaining in line with mercantilists. He further develops money supply ideas saying that the state may experience over or under-supply of money. Excess money should be melted down and exported or lent at high interest rates, or if too little money, there should be established 'a bank which, well computed, doth almost double the effect of our coined money' indicating Petty's understanding of the bank credit multiplier function. He is against debasement and gives examples of its inflationary effect, and in favour of English expansion into world trade.

John Law
Businessman and economist. Mercantilist tendencies. His most important contribution to economics was the idea that sufficient money supply was necessary for an economy to function properly and that the money supply could be increased through the issuance of paper money. In this manner, the state could issue paper and accumulate gold to its benefit. The inflationary consequences of his approach in the French 'Mississippi' fiasco spurred Physiocratic thought. Law held that money has value only in so far as it can be put to a given use. Thus it is like every other commodity, and has no 'imaginary value'.

John Locke
Chown describes Locke as a 'muddled economist' but foremost philosopher. He writes Two Treatises concerning Government 1690 and Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money 1691. He opposed a limitation upon the rate of interest. Like Petty, he derives the rate of interest from the level of rent on land. He regards land as productive, money as unproductive. Land is a source of surplus (i.e. amounts in excess of that required for self-sustenance) but he asks how money can likewise provide a surplus. He concludes that unused land can be rented out, so why not money too? Locke's thought is influenced by the mercantilists (i.e. a country grows rich by running a trade surplus). No one should own more than can be consumed himself. Changes in money supply affect prices.

Sir Dudley North
Discourses upon Trade 1691. In favour of free trade, views whole world as a single economic unit and all trades as being profitable as no one would continue in an unprofitable trade. Opposed limitation upon interest. North develops Locke's idea on interest further, saying that renting money is equivalent to renting land. Money is thus a stock like land, capable of producing further wealth. North is against mercantilism and holds that wealth arises from employment of capital that bears fruit, not simply the accumulation of unproductive money. The rate of interest is determined by the amount of money seeking borrowers. Unlike the mercantilists who say that money constitutes wealth, North holds that money is nothing more than a commodity.

David Hume
Philosopher foremost and economist second. Treatise of Human Nature, Of Interest, Political Discourses 1752. Friend of Adam Smith. Free-trader, but balance of trade could not be permanently favourable or unfavourable since a balance would eventually be achieved in line with economic conditions of individual trading countries. Relative price changes and thus movement of specie would achieve such a balance. Hume displays occasional mercantilist leanings in praising the value of treasure, but he adopts Locke's view of money as a symbol and that a nation's stock of it is unimportant. He holds that money supply determines prices, thus he is a quantity theorist. He traces the effect upon output and price changes of increases in money supply. The time-lag between increase in money supply and price increase is vital in allowing increased money supply to cause increased output, for new money supply increases 'diligence of labour before increasing the price of labour'. Thus increased output is achieved at the cost of labour according to Hume. The habits of people could be changed as a result of continual increases in money supply. The rate of interest is a result of the interaction between borrowers and lenders. He also holds that business profitability will affect the interest rate since no merchant will invest at low interest when he can invest in high profit projects. He points out that landowners who received rent for no exertion could become extravagant. The commercial classes, in contrast, were always working and thus producing for the nation. Commercial people save, landed aristocracy spend. Thus commercial activity increases supply of funds and lowers the rate of interest, whereas landed aristocracy do not lend and thus do not encourage lower rates of interest. Also, commercial activity increases competition thus lowers profits thus lowers interest rate at which merchants will borrow.

Cantillon
Writes Essay sur la Nature de Commerce en General 1755. Most systematic review of economic principles before Smith. In part one discusses wealth and its sources, value, wages, and price. In part two, money, interest and exchanges. Like Petty, land is the source of wealth and labour the power that produces wealth. All material goods constitute wealth. Like Petty there is therefore a dual source of value, land and labour. There is a relationship between land and labour value, since the amount of land required to provide subsistence to a labourer plus the rearing of two children to working age (half of the children were assumed to die before adulthood) must be of equal value to the amount of labour that it thereby allows. The price and intrinsic value of a thing in general is the measure of the land and labour that go into its production. Different products have different combinations of land and labour, e.g. watches and wood. Thus materials plus wages determine value, and intrinsic value never changes. Price however does fluctuate. For example, surplus unwanted farm produce may not fetch value of land and labour that comprises it. Thus supply and demand help to determine price. Because resources cannot be allocated exactly to satisfy demand, variations in market price will occur. The balance of trade concept is clearly dealt with by Cantillon, (surplus leads to excess money, higher prices and thus in due course a reduction in the surplus). Increase of money supply as mines produce more gold leads to increased consumption by mining companies, and thus increase in money supply throughout the rest of the economy. Thus prices increase (agreeing with Locke's quantity theory). However, Cantillon disagrees with Locke's idea of money having imaginary value. Instead, money has a fixed intrinsic value like every other product and money's market value may vary just like every other product. Thus money must be exchanged for goods in which equal amounts of land and labour have been utilised. Paper money is not the same as commodity money (the former loses value at the first sign of a credit deterioration). He investigates causes of foreign exchange price movements, links them to speculation, trade, specie movements and relative price levels. He also anticipates arguments of population pressure extended by Malthus and differential wages for differing occupations proposed by Smith.

Sir James Steuart
Adds little to existing theory, very voluminous writer. Principles of Political Economy 1767. Distinguishes between positive profit and relative profit. Relative profit arises from an exchange and is a transfer of wealth, not a net creation. Positive profit is a net creation of wealth arising from labour industry and skill. Agricultural surplus allows men to concentrate on industry. The real value of a good is determined by inputs of labour, materials and the subsistence wage. Profit is any amount above the real value garnered in exchange and determined by supply and demand. Thus Steuart adopts the mercantilist approach that profit (surplus) only arises in exchange. He also develops advanced supply and demand theory depending upon competition of sellers to sell in times of excess supply (thus falling prices) or competition of buyers to buy in times of shortage (thus increasing prices). Excess money would be hoarded or converted to plate. Thus there was a maximum amount of money that the economy could accommodate at any one time. Shortages of money would be made up by increased amounts of symbolic money.