Kautilya on law, economics and ethics

The purpose of this paper is to explore the status of economic analysis of laws relating to property and contracts during ancient times in India.

Modern research tools are used to present Kautilya's ideas on contracts and property.

Kautilya implicitly proposes a labor theory of property. He devised economic laws related to contracts, property and tort, which promoted economic efficiency and encouraged ethical behavior.

Current approaches ignore the role of ethics in designing legal rules for promoting economic efficiency.

Unless laws are designed to encourage and promote ethical conduct optimum economic efficiency is unlikely to be achieved.

Kautilya advocated a contract theory (between the ruler and the ruled), which was utilitarian in nature, however, unlike Bentham, he still appealed to the moral motivation.