Hindu Economics
Comprehensive price policy and abundance

Dr M.G. Bokare

We have studied the important guidelines on prices in economics in the Smritis. They can be co-ordinated into the harmonious economic system based on the policy for prices. This is the subject of study in this essay.

Shukracharya: He says that cost of production determines the price in equilibrium. This is the statement of the theory.

Manusmriti: The seer guides the king (government) to determine the cost of production in the meeting of the merchants. This is transparency in policy making. All buyers are also sellers in the business transactions. Further, the household consumers are also buyers. When the merchants as buyers attend the meeting they come to know the average cost of production of each commodity in the market economy. Ultimately, all buyers know the cost of production of all commodities in the market. Transparency is consummated in this policy suggested in Manusmriti.

Yajnavalkya: He adds that the rate of profit should be five per cent on the cost of production. It should be ten per cent on the imported goods. This is the policy of statutory maximum prices of all commodities.

Kautilya: He has suggested the administrative set-up to ensure the policy suggested above. The responsibility to implement the policy is fixed. An ideal economic system has to have a flawless price system. To prescribe the policy in the economy is called macro-economics. This shift in economics is the result of Lord J.M. Keynes who published his famous book General Theory in 1936. The guidance of the Smritis in the framework of price policy should be assessed in macro-economics. In the market when the sellers and the buyers know the cost of production as well as the maximum statutory price of a commodity the transactions are smooth. There is no scope for cheating the buyers. Yajnavalkya's suggestion goes a step further. The maximum price based on five per cent profit should be juridically studied. It is the maximum level of price. The sellers can sell at the lower price than the maximum price. They can not be punished. It promotes competition. Kautilya's penalties are for selling above the maximum price.

The paradigm

When similar commodity is produced by many enterprises, the state determines the average cost of production. The paradigm of this policy can be judged. All sellers will try to reduce their own costs of production, so that they earn maximum profit within the limit of the statutory maximum prices. The processes of improved technology and the measures of productivity will go to reduce the cost of production. Similarly managerial efficiency will be explored by the sellers. Ultimately, in the long period of improvements, the cost of production as well as the market prices would be lower. This trend is good for the buyers. Textbooks teach the lesson in this respect. In competition the businessmen try to produce to the maximum level. It is qualified by the available installed capacities as well as the existing level of fertility. As technologies improve the quantities of maximum output would continue to increase.

Similarly the textbooks teach the lesson that the equilibrium prices are lowest in the perfect competition. The price moves upward only then the demand is more than the supply. However this is transitory phase because there is freedom of entry in perfect competition. This logic is explained with the conclusion that in the long run the equilibrium prices would continue to move downward.

Holy Vedas and Abundance

In the first essay it has been informed that Holy Vedas have the prayers for abundance. It has also the guidance of competition in all walks of life including economics. The earlier discussion proves that the policy of prices in the economy prescribed by the seers of the Smritis accomplishes the idealised Vedic message: If the economy is allowed without the policies suggested in the Smritis, the economic system moves towards self-interest of some people.

Those who have some privileges would be the first people to perpetuate their advantages. This partakes the form of Darwinian law of power in the economy to continue the injustices imposed upon the weaker people in the economy. This is where the guidance in the western economics has to be juxtaposed with that of the Smritis. The governments have allowed the capitalists to form monopolies. And then they try to control the monopoly with the help of counter legislation. In India we have the legislation: Monopolies and Restrictive Trade Practices Act. Now production and prices are controlled by the monopoly capitalists. This is not possible if the governments follow the prescription described in the Smritis. Contrived scarcities and rising prices regulated by the monopolies are the results in modern economics. As against this the prescribed policy in the Smritis results in abundance and the downward moving prices in the economy autonomously. Classical economics in Europe differs here from Vedic economics. The former believes that abundance will be accomplished when the government does not interfere in the economic affairs, particularly in the domain of prices.

Vedic economics suggests necessary policy is such that the abundance is accomplished. Abundance should now be studied in the framework of consumption. What are its guidelines in Vedic Literature? We will study it in the separate essay. Abundance not for consumerism is the economic philosophy of Vedic Literature, mainly Smritis. Keshubhai urges Gates to make Gujarat the first NET zone New Delhi, Gujarat Chief Minister Shri Keshubhai Patel during his meeting with Microsoft Chairman Bill Gates invited Microsoft to be partner in IT development and make Gujarat the first NET zone in the world. He offered to use the MOU with Gujarat Informatics Ltd to promote Microsoft products in Government land at competitive prices and a virgin territory for a major IT company. Shri Patel stated that Gujarat expects Microsoft to establish a Microsoft Centre for Research and Development in satellite communication and wireless technology and Microsoft Development Centre in Gujarat. The Chief Minister also expressed the wish for support for the institute of Information Technology at Gandhinagar and assistance in creating a digital nervous system for e-governance.

He apprised that the State Government has signed an MOU with Microsoft to promote its products in Government. We are setting up a Hich-Tech Infocity, where Microsoft's presence with an R&D Centre and Development Centre is sought. The State has a strong IT Infrastructure through OFC and Gigabite network, Gujarat CM added. Gujarat CM stated that the State has been at the centre of India's trade. Even today, the State's economy is consistently growing at the rate of 9.6 per cent.