Kautilya- the True Founder of Economics

by Balbir Singh Sihag

  There are two additional points worth making. First, on balance, are we better off or worse off from moving towards monetary compensation and away from moral sense and vengefulness? That is a very fundamental question but Pareto static efficiency criterion cannot help in answering it. Secondly, it is a hopeful sign that preferences could be changed by appropriate, particularly, moral incentives. According to Kautilya, as mentioned above, ethical anchoring was not only a source of joy but also an instrument for preventing wrongs and, therefore, should be favoured.

  17.3 KAUTILYA ON NEGLIGENCE-BASED TORT LAW Kautilya described the prevailing laws at the time as inflexible, illogical and inadequate to the needs of increasing urbanization and industrialization. He (p 286) pointed out that all the previous thinkers had suggested fixed rates of penalty, without any consideration of the circumstances and some of the rates were quite high—up to twenty times the loss. He also pointed out that some suggestions by his predecessors on tort laws were illogical, such as, in a dispute between gamblers (p 355), the loser was to be fined 200-500 panas whereas the winner was to be fined only 48-96 panas or to levy (p 494) a surcharge on the basic penalty. Kautilya’s goal was to recommend a set of logical, comprehensive set of tort laws, which reduced the probability of predictable and avoidable injuries and losses caused due to negligence. He believed that tort law based on negligence, combined with the existing arrangements for penance, encouraged responsibility and reciprocity.

  Obviously, the application of negligence-based tort laws required some understanding of the relationship between liability and predictability, since under negligence-based tort law, failure to prevent only a predictable wrong was subject to liability. Kautilya did understand the link between liability and predictability. He argued ‘if the cause is knowable and hence foreseeable’, that is, prediction was possible if the cause could be identified. And it was possible to identify the cause if ‘its origin is human’, thus implying that outcome of human action could be predicted (discussed in Chapter 5). This methodology made it possible to link liability to the outcome of human action. He classified tort laws into two broad categories: (a) those related to physical injuries and (b) those related to financial losses. These are discussed in turn.

  Tort Laws Related to Physical Injuries: Increasing urbanization led to increased inflow of agricultural products into the towns by carts and other draft animals. Also, foreign traders were attracted to the town markets. Kautilya suggested building of roads to promote commerce and, particularly, imports. He understood that in addition to the pain and suffering caused to the victim, the economy would needlessly be impacted adversely due to physical injuries, resulting from preventable accidents due to negligence since he indicated in several contexts that both labour and capital were limited whereas these inputs were crucial for economic growth. He (p 369) wrote, ‘No one shall cause injury to others by: [the collapse of ] a rickety dwelling or cart; an unsupported pillar [or beam]; an unsheathed weapon; an uncovered or concealed pit or well; or allowing his horned or tusked animal to hurt someone, particularly by failing to come to the rescue when entreated to do so. A person shall not be held guilty of assault by causing injury, if he gives suitable warning (such as ‘get out of the way!’) when: felling a tree; leading by the rope an animal being trained; driving or riding an untrained animal (4.13).’

  Kautilya always tried to be as thorough as possible. He listed the various possibilities, which could have arisen in the countryside, added the precautionary warning; and just like today, the injurer was not to leave the scene of accident and was expected to help the victim. He recommended neither a fine nor any compensation to the victim if the injurer took all the necessary precautions to reduce the occurrence of an accident. Apparently, Kautilya expected the pedestrian also to take precautionary measures to avoid an accident. That is, an injurer was not liable if sufficient warning, such as ‘get out of the way!’, was provided.10

  Kautilya seemed confident in predicting the outcome of human actions but did not claim to predict those of animals. He recommended a heavy monetary fine if a person caused injury due to his negligence. However, a defendant was not liable for unforeseen or unpreventable injuries. He (p 369) wrote, ‘One who injures another by driving his cart [recklessly] shall be punished except [in cases of unforeseen accidents as] when: the nose string of a bullock or the yoke of the cart breaks [accidentally]; the draught animals move [suddenly] backwards or sideways; or there is a large throng of animals and men (4.13).’ He (p 475) recommended a fine of 200-500 panas plus the cost of treatment for ‘injuring the thigh, neck or eye; any injury affecting speech, movement or eating’. He recommended full compensation to the victim for all financial losses and only for serious physical injuries resulting from defendant’s negligence. He recommended a fine of 48-96 panas for causing less-serious physical injury due to negligence.

  Kautilya (p 475) did recommend compensating the victims for the cost of treatment of serious physical injuries. Given the state of medical science and practices at the time, one may assume that the principle of ‘restitutio in integrum’ did not make any sense. However, a physician’s skills and services were considered valuable. Kautilya (p 715) suggested that ‘physicians with surgical instruments, equipment, medicines, oils and bandages’ should accompany the army in the battlefield. He recommended a handsome salary of 2000 panas for the king’s physician (note 60 panas could support an average family for a whole year). There is no mention if the king’s personal physician was allowed to see other patients.

  Malpractice: Health care was a private affair. He prescribed punishment if the physicians caused any harm to the patients. He (p 246) stated, ‘Physicians shall inform the authorities before undertaking any treatment which may involve danger to the life of the patient. If, as a result of the treatment, the patient dies or is physically deformed, the doctor shall be punished (4.1).’ Only information and not prior authorization was required, indicating that the authorities (unlike the insurance companies) did not claim to know more than the physician. He listed different levels of punishments, depending on the severity of the offense.

  • Ifaphysiciancaused‘physicaldeformityordamagetovitalorgan’,

  he recommended a middle standard punishment, which was between 200-500 panas plus the cost of treatment. He described punishment for minor physical injuries in Chapter 19 of Book III and it varied from 24 to 96 panas.

  • If the physician operated on a patient without informing the authorities prior to the treatment, he recommended a fine of 48-96 panas if the patient died. The patient died despite correct treatment. It is not clear if the punishment was for not taking permission prior to the treatment or it was unwittingly the beginning of strict liability.

  • Ifthedeathwasduetowrongtreatment,thefinewas200-500 panas. In the absence of liability insurance, such a high penalty might have reduced the supply of physicians but perhaps forced them to be more careful. The following equation (5.1) (see Chapter 5) may be used to determine the liability in this case. Y = XB + ∈ (5.1)

  Y= 1 if the patient got well

  Y= 0 if the patient did not get well

  Y may be defined as the outcome of a medical procedure/

  treatment and X the standard medical procedure/ treatment (human action). According to Kautilya, if a physician, instead of adopting the correct procedure, X, adopted a wrong procedure/ treatment say Z, and the patient did not get well that would be a case of malpractice.

  L. Sternbach (1965, part I, p 320) comments, ‘The rules relating to the responsibility of physicians for their improper medical treatment were not introduced primarily to safeguard the patient, but rather to safeguard the good administration of the State. There is no specific mention in the Dharmashastra's and Arthashastra's, therefore, of the right of the patient to an indemnity; the penalty was imposed by the State and paid to the State (king).’

  A few remarks are in order. First, as mentioned above, the plaintiff was compensated
for serious injuries. Secondly, according to Kautilya, the victim should not care how he was compensated by society, that is, from the treasury or directly by the defendant. Thirdly, Kautilya wanted to delink the social objective of deterrence from the compensation to the victim by the defendant. Finally, the government could use the punitive damages to spend on preventive measures and take care of the family, if the breadwinner died or was disabled (p 182).

  At that time, cutting the tip of the nose was perhaps used like wearing a ‘scarlet letter’, a sign of social disapprobation. However, a new class of private entrepreneurs, in this case surgeons, came into existence to remove that stigma by fixing the nose. Kautilya provided the defendant a choice between paying the fine and going through the pain of mutilation and incurring the cost of repairing the nose. For example, he suggested a monetary fine of 54 panas in lieu of cutting the tip of the nose as a punishment. The defendant could compare the cost of physical pain from mutilation of the nose plus medical cost and pain of getting it fixed plus opportunity cost of lost wages to paying 54 panas. Similarly, he suggested monetary equivalents to cutting one hand, both hands, one leg, both legs, one eye, both eyes or death. Fines being just transfers, this suggestion might have reduced demand for those who were hired to cut the limbs and the surgeons who cared for after such mutilations, and thus diverting resources away from unproductive activities probably to productive ones (see Chapter 8).

  Physicians were not Subjected to Physical Punishment: Kautilya did not recommend any physical punishment to a physician for negligence in providing medical care. It was perhaps due to the long training and admirable character of the physician. Robert Lingat (p 303) observes (about the kind of penalties), ‘They were not similar to the penalty fixed in other ancient codes, eg the Hammurabi’s Code, because the Ancient Indian sources of law did not foresee in this case lex tallionis but imposed on the physician a fine, the extent of which varied according to circumstances.’ Lingat (p 303, fn. 6) elaborates, ‘Probably, the oldest code in which we can find the rule concerning the medical responsibility of physicians for their carelessness is the Hammurabi’s Code of Law. According to this code, any physician who operated on a man or an animal and caused death was liable, in case of a man, to the penalty of his fingers cut off (lex tallionis).’ Similarly, M Stuart Madden (2005, p 840) observes, ‘In the Asian context, numerous Indian groups, in contrast, demonstrate, without exceptions, “a general disapproval of retaliation as a means of obtaining justice.”’ (Also, see Kautilya on the Silver Rule in Chapter 6.)

  Tort Laws Related to Financial Losses: Kautilya saw the relevance of tort law to the agricultural economy also. He (p 438) recommended ‘twice the value of the damage for causing extensive damage to another while irrigating his own field (3.9.28)’ and (p 366) recommended compensation double the amount of damage to the person whose crops had been eaten by the owner’s animal. As discussed in Chapter 5, Kautilya fully understood the concept of value-added. Therefore, he (p 232) suggested compensation according to damage caused to ‘another’s ploughed or sown field by letting water overflow from a reservoir, channel or field.’

  Charging a fee for animal grazing on common pastures was a primary source of revenue to the village administration. Kautilya (p 367) suggested a fine of 24 panas for ‘animals grazing on village pastures due to owner’s negligence’ and for animals straying into gardens and 48 panas for ‘breaking down fences or eating grains in stores and threshing floors’. He recommended a fine of 48-96 panas plus payment of compensation if the animal died in the accident. According to him (p 320), ‘When a sick animal’s condition becomes worse due to wrong treatment or carelessness’ the veterinary doctor had to compensate for the loss of the animal. Essentially, the objective of tort laws was to prevent avoidable loss of goods and animals.

  As the agriculturists started having marketed surplus, they were likely to buy textiles, pottery and jewellery from the semi-urban areas. Also brewing liquor and tertiary industries such as laundry services, trading, entertainment, gambling and betting were responding to the increasing demand from urban dwellers. Kautilya was quite concerned about the defrauding of consumers by the suppliers, particularly by the goldsmiths and silversmiths. He (Book IV, chapter 1) proposed almost a mini consumer protection act.

  Kautilya covered all the services which were getting established at the time. He suggested a very high penalty for wrongs, which offered high pay-offs and could be committed with ease. Washer-men were fined for not washing clothes on smooth wooden boards, wearing and tearing them, renting out or losing customer’s clothes. For example, He suggested ‘compensation of value of garment plus twice the value as fine for ‘losing or substituting customer’s garments.’ Weavers were fined for measuring less, weighing less or substituting another cloth. Merchants were fined for wrong committed by their employees towards the customer. He suggested relatively higher penalties on the merchants, goldsmiths and silversmiths. For example, he suggested a penalty of ‘8 times the actual value’ for describing an article of lower quality as one of ‘higher quality’ by a merchant. His list of wrongs committed by goldsmiths and silversmiths was very long but just as an illustration, he suggested a penalty of 500 panas for substituting gold by a cheaper metal or alloy by a goldsmith.

  He considered availability of insurance as a pre-requisite to having any commercial activity since travel was very risky and market insurance was not available at that time. He suggested a governmentbased provision of insurance to handle this ‘missing market’ problem and, as pointed out earlier also, (p 235) prescribed, ‘Frontier officers shall be responsible for the safety of the merchandise passing on the roads and shall make good what is lost (2.21). Traders may stay inside villages after letting the village officers know of the value of their merchandise. If any of these is lost or driven away, the village headman shall recompense the trader (4.13).’

  Tort Laws Related to Defamation: Perhaps, due to stable neighbourhoods, the loss of one’s reputation was considered, at least as, important as a loss of property. For example, Kautilya (p 493) suggested that students, forest recluse and hermits, who had no money, might be required to perform penance, such as keeping fast in lieu of paying the monetary fines. However, he made an exception in case of defamation. He (p 493) wrote, ‘This rule does not apply to [serious crimes such as] defamation, theft, assault and abduction; in such cases, the prescribed punishment shall be implemented (3.16.38-41).’ This indicates that he considered defamation as a serious breach of social norms meriting relevant penances and penalties.

  At that time there were no printing presses, newspapers or tabloids to slander anyone’s reputation. So, use of verbal expression for defamation was sufficient for tort liability. Interestingly, even a true statement about another person’s defects was not allowed as a defense. Kautilya (p 471) suggested, ‘The punishment shall be highest for a sarcastic defamation and lowest for a true one (3.18.3).’ However, entertainers were given some latitude in this respect. He (p 247) wrote, ‘In their performances, they may, if they wish, make fun of the customs of regions, castes or families and the practices or love affairs [of individual] (4.1.59).’

  The detailed classification of defamation cases also indicates its seriousness. According to Kautilya (p 470), ‘A verbal attack is of three kinds—simple defamation, aggravated defamation and intimidation. The offense is categorized as simple defamation when a person is disparaged about any of his qualities, such as, his body, his nature or character, learning and attainments, profession or place of origin (3.18)’. He (p 471) defined aggravated defamation as, ‘Taunting a person with being leprous, mad or impotent or of low birth.’ He suggested penalties according to the gravity of defamation but no compensation to the victim. Similarly, he attached a high value to privacy since he (p 376) suggested a fine of 100 panas for ‘interfering in a neighbour’s affairs without reason.’

  No Sovereign Immunity: Kautilya’s king was more like a steward and was not above the law. According to him, the
re should be no sovereign immunity from wrongs and that was very rare at that time. He (p 490) recommended a fine of 48-96 panas for ‘holding anyone acquitted in custody’. He (p 491) recommended a fine of three panas on a jailer for ‘hindering the daily activities like eating, sleeping etc’. Similarly, the jailer was fined for torturing, withholding food or drinks or killing a prisoner. Clearly, water boarding would have been a punishable offence. As also mentioned earlier, he (p 493) wrote, ‘An innocent man who does not deserve to be penalized shall not be punished, for the sin of inflicting unjust punishment is visited on the king. He shall be freed of the sin only if he offers thirty times the unjust fine (4.13).’ He (p 383) suggested fining a judge for imposing a fine on an innocent person. He (p 228) suggested imposition of a fine on city guards for ‘stopping authorized movement and failing to stop unauthorized movement’. He (p 367) suggested a fine of 24 panas on the village headman for ‘ejecting a legitimate settler’ from the village. As noted in Chapter 15, even the king (system) was not spared of penalty if he fell short of his obligation to protect the property of the citizen.

  Trespass (malfeasance): Kautilya (p 439) recommended a fine of 48-96 panas for trespass into another’s house during the day time and a fine of 200-500 panas during the night time. In this case, there was no need to prove malice or negligence. However, he (p 435) made some exceptions. For example, entry by ‘beggars, tradesmen, drunks or madmen’ and under certain circumstances by neighbours would not be considered trespass.