An introduction to Kautilya and his Arthashastra

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Article citation: Balbir S. Sihag, (2009) "An introduction to Kautilya and his Arthashastra", Humanomics, Vol. 25 Iss: 1, pp. -

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Article Type: Guest editorial From: Humanomics, Volume 25, Issue 1.

More than 2,000 years ago, some time during the last half of the fourth century BCE, Vishnugupta Chanakya (son of Chanak) Kautilya, who was addressed as an Acharya (professor) and statesman, wrote The Arthashastra – the science of wealth and welfare [1]. It contains 150 chapters, which are distributed among 15 books. Writing style in ancient India was quite different from that of today. Generally, the ancient writers used to express their ideas in the third person to avoid any appearance of being egoistic. The Arthashastra develops three interlinked and mutually complementary parts:

1. Arthaniti (economic policies) to promote economic growth;
2. dandaniti (administration of justice) to ensure judicial fairness; and
3. videshniti (foreign affairs policy) to maintain independence and to expand the kingdom.

Kautilya was an independent thinker and it would be an error to label him as an administrator. He has been credited with destroying the Nanda rule and installing Chandragupta Maurya (321 BCE-297 BCE) on the throne. However, there is no reference to the emperor Chandragupta or to his kingdom Magadha in The Arthashastra since it was meant to be a theoretical treatise. Kautilya believed that the establishment of a rule of law, an impartial judicial system, and private property rights, devising an incentive mechanism to ensure efficient and honest government officials, encouraging dharma (ethics), the moral and spiritual rules of human behavior, provision of infrastructure and capital formation were the key ingredients for the creation of a prosperous, safe and secure nation.

Kautilya as a founder of political economy: It is claimed that Kautilya is an early pioneer of political economy before Adam Smith's The Wealth of Nations. A strong critique of the prevailing orthodoxies regarding the origins of economics and Adam Smith being its founding father is provided. It is not claimed that Kautilya provides any formal proofs or offers fully developed concepts or that The Arthashastra is as sophisticated as Samuelson's (1947) foundations. But it can be claimed that Kautilya's Arthashastra is much more pragmatic, more consistent, broader in scope and, analytically more rigorous than Adam Smith's Wealth of Nations. It is shown that despite the non-availability of modern analytical tools to him, his economic analysis was reasonably organized, adequately developed, and applied to a variety of problems. The Arthashastra contains a sufficient number of coherent economic concepts and hypotheses and an inter-dependent system of relationships. Table I provides a partial list of some of the concepts originated and appropriately used by Kautilya.

Table I. Partial list of the concepts used by Kautilya in his Arthashastra and their reemergence

Undoubtedly, the social, the political and the economic institutions and conditions prevailing at the time of Kautilya during the fourth century BCE were markedly different from those of today. Yet, remarkably almost all of his insights, concepts, and methodology are as relevant today in our post-industrialized, and globalized world as they were in his time. The Arthashastra far removed from the heat of current controversies provides a clearer picture of universal human tendencies, such as risk-aversion, rent-seeking and greed and Kautilya recommends that society should tirelessly search for ways to reduce risk and contain excessive greed and rent-seeking activities.

So far as the Western world is concerned, Adam Smith has been credited for founding economics during the eighteenth century. However, economic reasoning had achieved a much higher level of sophistication 2,000 years earlier in India. Clearly, both Kautilya and Adam Smith are true giants and should be so acknowledged. As Samuelson (Review of Economic and Statistics., 1959, 183-4) puts it very appropriately, “Scientific theories are like children in that they have a life of their own. But, unlike children, they may have more than one father”. May I add that the grown-up children (economists) have a chance to adopt a second worthy father of economics rather than the father adopting a child?

Balbir S. Sihag
Department of Economics, University of Massachusetts, Lowell, Massachusetts, USA

The author is deeply indebted to Dr Masud Choudhury, Editor of Humanomics and the Emerald Publishing Group for their superb professionalism and extraordinary courage, and wisdom in disseminating Kautilya's contributions through a special issue of Humanomics.

Note

1. These five articles in this special issue contain a majority of the basic concepts applied by Kautilya. However, the following references provide many additional concepts, which are contained in The Arthashastra.

Further reading

Sihag, B.S. (2004), “Kautilya on the scope and methodology of accounting, organizational design and the role of ethics in ancient India”, Accounting Historians Journal, Vol. 31 No. 2, pp. 125-48.
Sihag, B.S. (2005), “Kautilya on ethics and economics”, Humanomics, Vol. 21 Nos. 3-4, pp. 1-28.
Sihag, B.S. (2005), “Kautilya on public goods and taxation”, History of Political Economy, Winter, Vol. 37 No. 4, pp. 723-51.
Sihag, B.S. (2007), “Kautilya on administration of justice during the fourth century BCE”, Journal of the History of Economic Thought, Vol. 29 No. 3, pp. 359-77.
Sihag, B.S. (2007), “Kautilya on time inconsistency and asymmetric information”, Indian Economic Review, Vol. 42 No. 1, pp. 41-55.
Sihag, B.S. (2007), “Kautilya on institutions, governance, knowledge, ethics and prosperity”, Humanomics, Vol. 23 No. 1, pp. 5-28.
Sihag, B.S. (2007), “Kautilya on moral and material incentives, and effort”, History of Political Economy, Vol. 39 No. 2, pp. 263-92.
Sihag, B.S. (2008), “Kautilya on management by wisdom during the fourth century BCE”, International Institute of Informatics and Systemics, Proceedings Vol. VII, pp. 256-62.
Sihag, B.S. (2008a), “Kautilya on moral, market and government failures”, International Journal of Hindu Studies, forthcoming.
Sihag, B.S. (2008b), “Kautilya on risk-return trade-off and diversification”, Indian Journal of Economics and Finance, forthcoming.

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