Petty studied medicine at the Universities of Leiden, Paris, and Oxford. He was successively a physician, a professor of anatomy at Oxford, a professor of music in London, inventor, surveyor and landowner in Ireland, and a member of Parliament.

As a proponent of the empirical scientific doctrines of the newly established Royal Society, of which he was a founder, Petty was one of the originators of political arithmetic, which he defined as the art of reasoning by figures upon things relating to government. His Essays in Political Arithmetick and Political Survey or Anatomy of Ireland (1672) presented rough but ingeniously calculated estimates of population and of social income. His ideas on monetary theory (money) and policy were developed in Verbum Sapienti (1665) and in Quantulumcunque Concerning Money, 1682 (1695).

Petty originated many of the concepts that are still used in economics today. He coined the term full employment, for example, and stated that the price of land equals the discounted present value of expected future rent on the land.