Ancient economic thought
Schumpeter said that ‘the history of economic thought starts from the records of the national theocracies of antiquity whose economies presented phenomena that were not entirely dissimilar to our own' (1954, 49).
As Ajit Dasgupta (1993) explained:the third argument advanced by Schumpeter in favour of studying the history of economics is that it throws light on the workings of the human mind. For a history of economic thought in India this is, I believe, especially important... In ancient cultures the workings of the human mind tended to be closely linked to religion. A history of economic thought must therefore take the religious factor into account. If one is writing a history of economic thought for a country outside the mainstream of Western culture, this could give rise to special difficulties. These were particularly emphasised by Max Weber in his highly influential work on the sociology of religion.
However, Dasgupta included a caveat that ‘studying the history of Indian economic thought can indeed help illuminate the workings of the Indian mind. The illumination would be the more effective if we discarded the distorting mirror of Weberian sociology'. Hardly anyone has followed these warnings, without which the crux of his interpretation would be misleading.
Many unique features of Indian economic thinking were depicted in ancient texts from the very early period of civilization, and they invariably contain an ocean of economic ideas conceived very broadly (Thanawala, 1997; Ambirajan, 1997). According to Ambirajan (1936—2001) ‘many of the classical Indian writings on ethics, economics, law or philosophy are somewhat like mathematical theorems whose proofs have not been written out. Hence we have to work out how and why these terse statements came about' (1997, 32).
The classical literature relevant for understanding ancient economic thought in India includes Vedas, Arthasasthra, Ramayana, Mahabharata, Manusmriti, Sukraniti, Nithisasthra and Thirukkural (Basu and Sen, 2008).
Kautilya, the foremost economic thinker of ancient India, treated economic topics along with political and military matters in his Arthasasthra. Indeed, Arthasasthra is one of the earliest tracts of economic science, written at least twenty centuries before Adam Smith. Another source of ideas on economics was the Santi Parva of the Mahabharata, an epic wherein advice concerning the accumulation and distribution of wealth was interspersed with advice on how to run a country (Ambirajan, 1997).But the two outstanding works among the ancient literature are Thirukkural and Arthasasthra. These texts have many original economic ideas premised within social and political contexts. Thirukkural (couplets or aphorisms), which is believed to be written 2,400 years ago by Thiruvalluvar, a Tamil Poet, has 1,330 couplets in 133 chapters covering all aspects of human life in relation to the state, economy and society. Moreover, Thirukkural is a universal work as it deals with a wide range of issues from ploughing a piece of land and the method of ruling a country, to the code of purposeful life in society (Kalam, 2010). The book is divided into three broad sections that discuss virtue, wealth and human emotions (love).
Arthasasthra discusses various elements of economics, the title being translated as the science of political economy or science of material gain. It is now accepted that its author Kautilya was a contemporary of Aristotle. At the centre of Kautilyan economics is an obligation of the state to provide for the welfare of the people. Arthasasthra also deals extensively with international trade, taxation and the labour theory of value. According to Charles Waldauer (Waldauer et al., 1996), Kautilya
explicitly recognizes that international trade (trade among kingdoms) in goods and services is a major vehicle for increasing the sovereign’s wealth as well as that of his subjects. Kautilya also counsels his monarch that the wealth and well being of the realm can be most advanced by a fair and efficient system of taxation, one which will supply the king with tax revenue while not stifling economic growth. Finally Kautilya advocates a wage system which rewards workers for the value they have created and encourages them to work harder and more efficiently.
The most common features in both Thirukkural and Arthasasthra are the wisdom of wealth creation and prosperity within society engendered by individual economic agents, as well as the importance of family culture with or without the help of a modern notion of the state. Both elements are intertwined and equally necessary.