Economics of Kautiliya Shukra and Brihaspati.pmd

3. The state use to discourage enhancement of price by bidding.
When purchasers happen to bid for it the enhanced amount of the
price together with the toll on the merchandise shall be paid into the
king’s treasury. (ibid)
Kautilya also provided detailed guidelines for determination of
various components of price. Guidelines for wage determination are
scattered in 3.13 and 14, 4.2 and 5.3 of the book. The basic principles
was that wages should be so determined by contract between the
employer and the employee which once settled would be binding on
both the parties that the employer is not cheated and at the same time
the employee is not exploited.There were also specific guidelines for
ascertaining transport, storage and other associated expenses. Rigid
and simplified rules were prescribed for determining tolls and taxes on
all the commodities. In Kautiliya Arthashastra and Shukra-niti the
following foundation of price determination has been taken-
Price = average cost of production + tolls and taxes + transport
and associated costs + profit margin
Where average cost of production = cost of raw materials +
wages + interest
Thus according to Shukra and Katuilya,
Price = value of the commodity
Where price denotes market price and value denotes normal
price. The normal price, according to Kautilya and Shukra, is average
cost of production.
Availability and Non-availability Effect
According to Shukra there is always price fluctuation (around
normal price). The causes, according to him, are as follows-
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1. If the commodity is scarce its price rises.
2. If the supply of the commodity is sufficient the price falls.
3. According to the goal of seller price may be high or low.
4. According to the quality of a commodity price may be high or
low.
Kautilya has used two different words for normal price and
market price. He uses Mulya (Value) for normal price and Arghya (Price )
for market rate. The concept of high and low price as described in
Shukra-niti is slightly different from that of Marshallian price theory.
Marshallian price is determined at the point where demand and supply
are equal. Shukra uses two terms for the explanation of price
determination- mulya or value and argha or price. According to Shukra
price is determined at the point where value equals the price. He was
aware of availability effect and non-availability effect in the price. In
non-availability condition price will be high in comparison to value but
in availability condition price will be low in comparison to value. The
effect of avalability and non-availbility is explained in table 5.3.
Table 5.3. Availability and Non-availbility Effect in Shukra-niti
Price Relation Cost Tendency
Price equals value no tendency to change
Price greater than value falls
Price smaller than value rises
Source: Shukra-niti, 2000, 2.146
Fig. 5.1 explains the equilibrium when value and price are
equal. Fig. 5.2 explains the availability effect. In this situation, Market
Price = Normal price - availability effect or Market price < Normal
price. Fig.5.3 explains the non-availability or scarcity effect. In this
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