History of Economic Thought/Ancient



Oriental economic thoughts are lying scattered in Vedas, Upanishads, Smritis, Epics (Ramayana and Mahabharata), Shukraniti, and Boudha and Jain scriptures. The subject matter of Political Economy is found in Mahabharata Shanti-parva, Manu-smriti, Yajnayawalkya-smriti, Shukra-niti, and Kautiliya Arthashastra.
The use of word Arthashastra (a parallel word to Economics) is very old in Sanskrit literature. Atharva-Veda tells that Arthashastra is a branch of Rig-Veda. The time of Atharva-Veda has been estimated by scholars about 3000 BC. Bokare, MG.2009. Hindu economics, Pune: MG Bokare Memorial Memorial Foundation.

The Legend of Paitamha TantraEdit

The first known book on Oriental Economics was Paitamaha Tantra. This is stated in Mahabharata and Shukra-niti (1.1-3) clearly. According to the legend, in the beginning there was stateless society and all people perform their duties fairly. Slowly population increased and people became greedy. They forgot their proper duties and then started the rule of might is right. To protect the society from anarchism and disorder the Grandsire- the creator composed of a voluminous book with 100 thousands verses, known as Paitamaha Tantra. For common people this book was abridged by Lord Shiva of large eyes, the Divine Indra, the most intelligent sage Brihaspati and the great celebrity Shukra respectively. This tradition is supported by Kautilya by saying that he owes for his views to two of the great teachers- Brihaspati and Shukra.[1]
The subject matter of Grandsire's book was divided into five broad divisions [2]-

  • 1. Vedas
  • 2. Anvikshiki- Philosophy
  • 3. Varta-Economics
  • 4. Danda-niti- Power Policies
  • 5. Vaidyak-shastra- Medical Science


These five genres were adjusted in such a way that the following subject matters were discusset in that book- Political Science- Qualifications of the King and Minister of War

  • - Qualification of ministers, ambassadors, crown prince, and spies
  • - Seven organs of state
  • Army science- Eight organs of army
  • Economics- Acquisition and utilization of wealth
  • -Economic activities
  • -Earnings of workers and employe
  • - Revenues of state
  • Sociology-Human settlement in rural and urban areas
  • -Association with scholars
  • -Laws of dress
  • -Laws of meals
  • -Duties of a ruler and common people
  • Law and order- Public security, Palace security
  • Legal system- Procedure of rule regulation
  • Civics- Rules of the progress of society
  • Mythology- Traditions
  • - Religious ceremonies
  • Medical science- Diagnosis of 72 diseases

Kautiliya Arthashastra and its Historical ContextEdit

The most influential of all ancient books on Political Economy is Kautiliya Arthashastra. It is one of the great books of political and economic thoughts,...on each reader it leaves its mark…[3]The first great political realist: Kautilya and his arthashastra, New York: Lexington Books. 1) This treatise is an exposition on statecraft, economic policy and military strategy which identifies its author by the name Vishnugupta Chanakya, who is traditionally identifies with Kautilya or Kautalya (about 400-300 BC), a renowned Professor of Arthashastra at Taxila Univerisity.
Legend has it that Kautilya or Chanakya, a Brahmin by birth was insulted by a Nanda king, cursed that king threaten to destroy him and he miraculously escaped disguised as an ascetic. Afterwards he swore that he would destroy the Nanda kings and the Greek foreign invaders from Aryavarta-the whole region of Aryans. For this he took the support of Chandragupta Maurya (the grandfather of more famous king Ashoka). Chandragupta is said to be related with Shakyas clan near Lumbini.[4] Just after Alexander's death in circa 323 BC Chandragupta Maurya and Kautilya began their conquest by stopping the Greek invaders. [5]

Date and AuthorshipEdit

Trautmann and IW Mabbette agree that Arthashastra is a composition from no earlier than the second century CE but based on earlier materials. KC Ojha puts forward the view that the traditional identification of Visnugupta with Kautilya was caused by a confusion of editor and originator and suggests that Visnugupta is in fact an analyst detractor of the original work of Kautilya. Thomas Burrow goes even further and says that Chanakya and Kautilya are actually two different people. According to Jolly the work is a piece of forgery of about the third CE. But Shamashastry, Kangle, Sharma, Jayaswal, Gairola have presented many evidences from Arthashastra, Kamandaki-nitisar, and Boudha and Jain Scriptutre which are compatible only with the fourth century BC. [6][7] [8]


Although it is the original work of 4th century BC (and this tradition was followed by Kamandak and his followers including Chandeswar of 14th century) but it became popular only after Shamashastry, who discovered it from a Brahmin of Mysore. He transcribed, edited and published Sanskrit work in 1909 and he started its English translation which was published in 1915 with the support of King Boudiyar of Mysore. MM T Ganapatashstri provided laudable service by translating the original text into Sanskrit in 1924-25. Kalyanev translated it into Russian language in 1959 and Vachaspati Gairola translated it in Hindi in 1962-63. Kangle edited the Sanskrit text, translated in English and wrote the commentary during 1960-65 in three volumes. Nepalese translation was presented by Royal Nepal Academy in 1967. The editor and translator of the book are SN Sharma and KR Aryal respectively. An important version of this treatise has been presented by LN Rangrajan who had rearranged, edited and explained it in 1992 with necessary diagrams and commentaries. A new Nepalese translation has been recently published by Vidyarthi Prakashan. The translator of this book is TP Luitel. It is a shadow translation of Gairola’s book. Some other books are also found in the name of Kautiliya. The most popular among them is Chanakya-niti. The others are Chanakya-sutras and Arthashastra.

Four BranchesEdit

According to Kautilya knowledge has four branches as follows-

  • 1. Anvikshiki (Philosophy)
  • 2. Trayee (Triple Vedas)
  • 3. Varta (National Economy)
  • 4. Danda-niti (Power Policies)

1. Anvikshiki (Philosophy)Edit

Kautilya defines Anvikshiki (philosophy) in the following words- Philosophy is the light of knowledge, easy means to accomplish all kinds of acts and receptacle of all kinds of virtues. The definition clears that this subject provides the methods and tools as well as conclusion for an investigation. Therefore Anvikshiki was a combination of logic and philosophy. Anvikshiki comprises of three philosophies- Sankhya, Yoga, and Lokayata (Atheism).

2. The Triple VedasEdit

In Sanskrit literature the meaning of trayee is knowledge in three Vedas. Vedas are the most ancient written document of human civilization available at present. In the beginning this knowledge was transferred from one generation to another on oral tradition (or by hearing) therefore these are also known as Shruti. The present knowledge owes from the past civilization therefore we must always have a link between present knowledge to that of the past knowledge of our ancestors. These three are as follows-

  • a. Rig-Veda- The collection of hymns to be recited is known as Rig-veda.
  • b. Yajur-Veda- The collection of mantras for offerings (to God) is known as Yajur-Veda.
  • c. Sama-Veda- The collection of musical mantras to be sung is Sam-Veda.
  • Kautilya goes on saying- Atharva-Veda and Itihasveda are also Vedas. Phonetics, Ritual, Grammar, Etymology, Prosody and Astronomy are auxiliary sciences and therefore subordinate part of Vedas. (Kautiliya Arthashastra, 2003, 1.3.1-3)

3. Varta (Economics)Edit

Varta-National Economy comprises of Krisi, Goraksha, and Banijya that is agriculture, animal farming and commerce. Thus it was a three sector economy the having the major source of income in agriculture. Varta was very important for a state because it used to receive grain, cattle, money, and various kinds of products and labour. (Kautiliya Arthashastra, 2003, 1.3.1-3)

4. Danda-niti or Power PoliciesEdit

The literal meaning of danda is rod stands for the scepter used by the king. The other meanings of danda are- army, staff, one of the policies. There are four policies of dispute settlement, that is, Sam, Dam, Danda and Bheda. Two of the methods- Sam and Dam are known as soft actions and other two methods- danda and bheda are known as hard actions of the state. Thus danda-niti is related with power policies. According to Mahabharata its mythical original is Paitamaha-tantra, handed down by the Grandsire- Brahma, at the time of matsya-nyaya. [9]
Where it means punishment it has to be understood as just punishment. For a king meeting out unjust punishment is hated by the people. He terrorizes while one who is too lenient is held contempt; whoever imposes just and deserved punishment is respected and honoured. [10]

Content in Brief[11]Edit

Kautiliya Arthashastra is divided into 15 Departments known as Adhikarana are follows- Department One deals with the equipment of the king for the performance of his duties as a ruler. It discusses such topics as the training of the king, the appointment of ministers and other officers of the state, the daily routine to be normally followed by the ruler and so on. The numbers of chapters in this department is 21.
Department Two principally describes the duties of the various executive officers of the state. It gives a fairly fly picture of state activity in various fields. It also includes a discussion on such questions as settlement on unoccupied land building a fort lying and the capital and so on. The numbers of chapters in this department is 36. Department Three which is concerned with law and its administration, reproduces a complete code of law. The numbers of chapters in this department is 20. Department Four is concerned with suppression of crime. It shows how to trace and punish thieves, murderers, dacoits, and other criminals. The numbers of chapters in this department is 13.
Department Five is rather miscellaneous in character. It dwells on measures that may be necessary in emergencies, describes the steps to be taken against seditious persons and lays down scales of salaries for the different categories of state servants. It also explains how a candidate for a high office in the state should endeavour to secure and retain it. Finally it gives advice to the chief minister on ensuring continuity of rule on the demise of the ruling monarch. The numbers of chapters in this department is 6.
Department Six which is very short and enumerates the qualities which make each of the seven prakritis, or constituents of the state ideal, also describes the circle of kings as a preliminary to a discussion on the state's relations with its neighbours. The numbers of chapters in this department is 2.
Department Seven contains and exhaustive discussion on the way in which each of the six measures of foreign policy may be used in the various situations that are likely to arise. The ultimate goal set before the ruler's consequent of the world. Consequently we have description of the various ways in which rivals may be outwitted by trick of overcome by force. The numbers of chapters in this department is 18.
Department Eight is concerned with calamities, i.e., shortcomings or weaknesses affecting the various prakriti. It is necessary to overcome the vyasanas before any aggressive activity, can be undertaken. The numbers of chapters in this department is 5. Department Nine deals with preparations for war and describes the kind of troops that should be mobilized for an expedition the proper seasons for starting on an expedition, the precautions to be take and the dangers to be guarded against before starting and so on. The numbers of chapters in this department is 7.
Department Ten is concerned with fighting and describes the campaign of the army its march, various modes of fighting, types of battle, army and other topics. The numbers of chapters in this department is 6.
Department Eleven which contains a single chapter, explains how the vijigisu or an ambitious ruler should overpower the independent oligarchical principalities. This department has only one chapter.
Department Twelve shows how a weak king, when threatened by a stronger king, should frustrate the latter's designs and ultimately overcome him. The numbers of chapters in this department is 6.
Department Thirteen is mainly concerned with the conquest of the enemy's fortified capital by subterfuge or by fighting. It also describes how the conquered territories should be ruled by the ambitious king. The numbers of chapters in this department is 5. Department Fourteen describes various secret remedies and occult practices useful for getting rid of enemies or traitors. The numbers of chapters in this department is 4.
Department Fifteen, having single chapter, is devoted to the methodological issues of the subject. It defines and illustrates from the text itself the thirty-two methods of treating a subject.
From the view point of modern economics following discussions of this treatise are relevant[12]-

  • 1. Definition and methodology of Economics
  • 2. Nature and objectives of material prosperity
  • 3. Sectors of economy and their development
  • 4. Government revenue and expenditure
  • 5. Principles of taxation
  • 6. Welfare economics


In spite of this fact that there was a voluminous treatise containing the subject matter of economics in the past, the book is not available at present. The abridged versions of that book- Vaishalaksa Shastra, Bahudantak Shastra, and Barhaspatya Shastra are also not available. Perhaps these four masterpieces have been lost. The only abridged version that is found in this tradition is Shukra-niti. The other book, Kautiliya Arthashastra which was written in about 400 BC is available. Many theoretical and practical foundations of modern econmics are found in this book. Although the principles and practice propounded in these treatises are universal and applicable in modern set up also.


  1. Gewali, BR.2012.Economics in Upanishad, INJA Mission 2(2), Butwal: Innovative Journalists Association.
  2. Mahabharata, 2003, SP, Chapter 59
  3. Boesche, Roger.2000
  4. Gewali, BR.2012.Economics of Kautilya, Shukra and Brihaspati, Rupandehi, Manigram: Gyanjyoti Prakashan. (Pathshalamasik.economicsofkautilyashukraandbrihaspati)
  5. (Boesche, Roger.2000.The first great political realist: Kautilya and his arthashastra, New York: Lexington Books. 1
  6. Jayaswal, KP.1978.Hindu polity, Bangalore: The Bangalore Printing and Publishing Company Ltd.
  7. Jha, LK.2006.Arthashastra and its modern relevance in Economics in Arthashastra editors RL Basu and SK Sen, New Delhi : Deep and Deep Publication.
  8. Kautiliya Arthashastra-III. 2003. Commentaries by RP Kangle, New Delhi: Motilal Benarasi Das.
  9. (Rangrajan, LN, Re-arranger, editor and translator.1992.Kautilya- The Arthashastra, New Delhi: Penguin Classics. 14)
  10. Kautiliya Arthashastra, 1.4.7-10
  11. Gewali, Babu Ram, 2011, Mirmire, Economic Articles Issue, 40(3), vol.310,2011, Kathmandu : Nepal Rastra Bank
  12. Gewali, BR.2013.Oriental Economics- Revisited, Rupandehi, Manigram : Gyanjyoti Publicatioon ISBN 978-9937-7363