The Economics of the Arthashastra
An often overlooked precursor to classical economics and one of the oldest treatises ever written on the subject is The Arthashastra, which was written by Kautilya and was meant as a primer for a monarch on how to rule.
To increase the wealth of a kingdom, one requires an understanding of money and how it can grow; and thus Kautilya set in place one of the oldest economic treatises in the world-almost two thousand years before the classical economists we read about today.
Kautilya writes about some important economic concepts such as trade, taxation, and wages; he does not differentiate between the wealth of the monarch and that of the people, and as such, has been likened to the German cameralist school of thought.
He held a comparative cost advantage view when it came to international trade and understood that it is more efficient to import goods when other nations can make them cheaply when compared to domestically produced goods. He recognised that exports are not sacrosanct to the economic growth of the nation and it is mutually beneficial when imported products are cheaper than domestic ones.
Heavy state regulation of trade was also important so as to not compromise state monopolies and help rival states, price and profit controls were advocated; while 'just' and 'fair' prices and profits were encouraged.
Import and export duties were used for raising revenue, making bilateral trade agreements preferable. Luxury goods were taxed heavily compared to non-luxury goods.
Taxation was highly developed and finance was of utmost importance, overseen directly by the emperor.
Taxes were levied on private income, wealth and products. It was ensured that resources were used efficiently and taxation was fair and the system resembled that of the Roman empire at its height. Taxes were levied on a capacity to pay basis so as to not damage the economy and cause resentment.
Similarly to goods taxes, income taxes were also progressive in nature. The census taking to achieve such a tax system was done at a level not seen until the Industrial Revolution.
Kautilya also uses a primitive labour theory of value and has in place a labour law of sorts to ensure that there are strict rules for both employees and employers such that neither can be cheated. He ensures that workers are treated fairly, "payment to labour is not contingent on the marketing of goods" and "production is not hampered by the irresponsible conduct of workers."
This treatise predates classical economists like Smith, Ricardo, Mill and others by nearly two thousand years; unfortunately it would not last, for in the decline of the Gupta empire in the 6th century the text was lost, not to be rediscovered until the early twentieth century. Had it survived, it might have been an important foundation stone to the ideas of classical economists and led to the development of the subject, perhaps much earlier than the 18th century.
Divyam Maskeri
SYBA
To increase the wealth of a kingdom, one requires an understanding of money and how it can grow; and thus Kautilya set in place one of the oldest economic treatises in the world-almost two thousand years before the classical economists we read about today.
Kautilya writes about some important economic concepts such as trade, taxation, and wages; he does not differentiate between the wealth of the monarch and that of the people, and as such, has been likened to the German cameralist school of thought.
He held a comparative cost advantage view when it came to international trade and understood that it is more efficient to import goods when other nations can make them cheaply when compared to domestically produced goods. He recognised that exports are not sacrosanct to the economic growth of the nation and it is mutually beneficial when imported products are cheaper than domestic ones.
Heavy state regulation of trade was also important so as to not compromise state monopolies and help rival states, price and profit controls were advocated; while 'just' and 'fair' prices and profits were encouraged.
Import and export duties were used for raising revenue, making bilateral trade agreements preferable. Luxury goods were taxed heavily compared to non-luxury goods.
Taxation was highly developed and finance was of utmost importance, overseen directly by the emperor.
Taxes were levied on private income, wealth and products. It was ensured that resources were used efficiently and taxation was fair and the system resembled that of the Roman empire at its height. Taxes were levied on a capacity to pay basis so as to not damage the economy and cause resentment.
Similarly to goods taxes, income taxes were also progressive in nature. The census taking to achieve such a tax system was done at a level not seen until the Industrial Revolution.
Kautilya also uses a primitive labour theory of value and has in place a labour law of sorts to ensure that there are strict rules for both employees and employers such that neither can be cheated. He ensures that workers are treated fairly, "payment to labour is not contingent on the marketing of goods" and "production is not hampered by the irresponsible conduct of workers."
This treatise predates classical economists like Smith, Ricardo, Mill and others by nearly two thousand years; unfortunately it would not last, for in the decline of the Gupta empire in the 6th century the text was lost, not to be rediscovered until the early twentieth century. Had it survived, it might have been an important foundation stone to the ideas of classical economists and led to the development of the subject, perhaps much earlier than the 18th century.
Divyam Maskeri
SYBA
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