Meaning: William Petty, an influential economist of the 17th century, made this statement in his work "Verbum Sapienti" (1665). This quote reflects Petty's views on the concept of interest and compensation in economic transactions. Petty was known for his contributions to the field of political economy and his ideas laid the foundation for modern economic thought.

In this quote, Petty is addressing the practice of lending money with the condition that it cannot be demanded back until a certain future time. He argues that in such a scenario, the lender is justified in taking compensation for the inconvenience of not having access to the money during the specified period. This concept is fundamental to the understanding of interest and the time value of money in economics.

The quote highlights the idea that when individuals lend money, they are essentially sacrificing their immediate access to that money for the agreed-upon period. During this time, the lender is deprived of the opportunity to utilize the funds for other purposes, such as investments or consumption. Therefore, according to Petty, it is reasonable for the lender to expect compensation for this inconvenience.

Petty's assertion aligns with the fundamental principle of interest in economics, which is the concept of being compensated for the use of capital over time. The time value of money is a core concept in finance and economics, emphasizing that a sum of money has different values at different points in time. This is because the same amount of money available today can be invested to generate returns, making it more valuable than the same amount received in the future.

Furthermore, Petty's quote touches upon the notion of opportunity cost, which refers to the benefits that are forgone when one alternative is chosen over another. In the context of lending money, the lender is forgoing the opportunity to use the funds for other purposes during the specified period. As a result, the compensation for this sacrifice is reflected in the form of interest or a similar mechanism.

From a broader perspective, this quote sheds light on the dynamics of economic transactions and the rationale behind the charging of interest. It underscores the idea that interest serves as a form of recompense for the lender's willingness to part with their money for a certain period, recognizing the opportunity cost and the time value of money.

In conclusion, William Petty's quote encapsulates the economic principle that justifies the charging of interest or compensation in lending arrangements where the lender agrees to forego immediate access to their money. This concept is deeply rooted in the time value of money, opportunity cost, and the fundamental principles of interest in economics. Petty's insights continue to resonate in contemporary economic theory and provide a foundational understanding of the role of compensation in economic transactions.