Economics of Kautiliya Shukra and Brihaspati.pmd

high. I think it unlikely that anyone would pay a correspondingly high
price to have his lawn mowed in that fashion'.
'This puzzle – the relation between value to the consumer,
cost of production, and price- was solved a little over 100 years ago.
The answer is that price equals both cost of production and value to
the user, both of which must therefore be equal to each other'.
(Friedman,1990, Section 3, Chapter 2)
Price Theory in Wealth of Nations
Initial theories of value were based on labor theory. Adam
Smith used the word value in two senses. Sometimes he used this
word to denote utility and sometimes to denote market price. According
to him, 'The one may be called value in use the other value in exchange.
The things which have the greatest value in use have frequently little
or no value in exchange, and on the contrary those which have the
greatest value in use have frequently little or no value in use. Nothing is
more useful than water but it will purchase scarce anything scarce
anything can be had in exchange for it, a diamond on the contrary has
scarce any value in use but a very greatest quantity of other goods
may frequently be had in exchange for it'. (Wealth of Nations, Book
1, Chapter IV) Value in exchange is the relative proportion with
which the commodity is exchanged for another commodity (in other
words, its price in the case of money). According to Smith, labour is
the real measure of the exchangeable value of all commodities. (ibid,
Book 1, Chapter V)
He argued, 'The real price of everything, what everything really
costs to the man who wants to acquire it, is the toil and trouble of
acquiring it.' (ibid) Smith further stresses in the following words,
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'However even a person drinking water from a good stream at his
doorstep must spend labour to gain this value, at least if this action is
relevant to economics'.
'In the example of person going to a stream at his doorstep, if
this is a pleasant activity, it is not labor. If it is not pleasant it could be
relevant to economics....' (ibid)
Price Theory in Manu-smriti
Price theory/policy has been explained in Manu-smriti clearly.
Manu’s suggestions for price policy is given as follows-
1.Compare the value of commodities purchased and
commodities sold, estimate its loss of value and then determine the
price of that commodity.
2.The price should be determined in such a way that both side
buyer and seller should be satisfied. After every five nights or in each
fortnight prices should be revised regularly. 1 (Manu-smriti, 8.410-11)
Manu further says that the policy making for price
determination should be done by a market expert- Arghavit. Thus, in
the times of Manu market experts were appointed as economic advisers
of the state.
Price Theory in Shukra-niti
In Shukra-niti foundations of modern cost concepts are found.
The concepts of real cost, alternative cost and money cost have been
explained clearly. Shukra states that the sacrifices, expenses, and causes
used to produce a commodity is its cost. 2 (Shukra-niti, 2000, 2.146)
One can find that this concept is similar to the real cost concept given
by Marshall. Similarly, Shukra defines the total cost of production as
the summation of the following-
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