Kauṭilya on Moral, Market, and Government Failures

Abstract

Theologians, moral philosophers, sociologists, political scientists, and economists have been debating, surmising, evaluating, and commenting for over two thousand years on the performance of the market as a harbinger of miracles or menaces. A considerable amount of intellectual energy has been devoted to finding answers to many fundamental questions, such as: Is the market moral (Blank 2004; McGurn 2004)? Has it been a civilizing force or a destructive influence on the moral foundations of a society?1 Each discipline offers its unique perspective, and scholars are spread all over the spectrum from pro-market to anti-market. Theologians and moral philosophers usually discuss the fairness aspect of the market. Pro-market scholars argue that the market allows freedom of choice and encourages creativity and entrepreneurship. Anti-market scholars, on the other hand, deplore the fact that those who do not have any purchasing power are excluded from the market. However, they often ignore Paretian efficiency considerations.2 Generally speaking, economists concentrate on the Paretian efficiency conditions when evaluating the performance of markets. The traditional view in the West, at least since Adam Smith, has been that unless monopolies, public goods, and externalities, and other contributors to market failures, were present, markets would remain efficient. Again, since the Sherman Act of 1 890, the traditional response to these market failures has been government regulation. Jonathan B. Baker discusses the "necessity and successes of antitrust enforcement" (2003: 27). However, the beneficial effects of antitrust laws have been challenged, particularly since the last quarter of the last century. Clifford Winston (2006) collects and synthesizes many empirical studies on market and government failures and concludes that the cure for market failure has often been worse than the disease. He lists shortsightedness, inflexibility, and contradictory policies as the causes of government failure to cure the market failure. The assumption underlying such an analysis has been that the