Kautilya on law, economics and ethics

Purpose - The purpose of this paper is to explore the status of economic analysis of laws relating to property and contracts during ancient times in India. Design/methodology/approach - Modern research tools are used to present Kautilya's ideas on contracts and property. Findings - Kautilya implicitly proposes a labor theory of property. He devised economic laws related to contracts, property and tort, which promoted economic efficiency and encouraged ethical behavior. Research limitations/implications - Current approaches ignore the role of ethics in designing legal rules for promoting economic efficiency. Practical implication - Unless laws are designed to encourage and promote ethical conduct optimum economic efficiency is unlikely to be achieved. Originality/value - Kautilya advocated a contract theory (between the ruler and the ruled), which was utilitarian in nature, however, unlike Bentham, he still appealed to the moral motivation.