Nudgeshastra: Ancient India’s Contribution To Behavioural Economics

In 1905, a librarian discovered a mound of palm leaf documents lying in the Oriental Research Institute Library at the University of Mysore. He painstakingly transcribed them onto fresh palm leaves, and then an English translation was published in 1915.

Had it not been for his efforts, the world would have been deprived of the wisdom of the Arthashastra, a seminal work on statecraft and economics, written by Kautilya, also known as Chanakya, who was the advisor to India’s Maurya kings in the third century BCE. Chanakya is sometimes described in shorthand in Western literature as India’s answer to Machiavelli, a description that is both condescending and inadequate. Chanakya lived almost two thousand years before Machiavelli, and his treatise, unlike Machiavelli’s The Prince, was not concerned primarily with the assumption or retention of political power, but with how a state could be governed, covering social, economic, and political aspects, primarily focusing on the welfare of the people. Indeed, it might be argued that Chanakya could lay claim to being the father of Economics, as his work is perhaps the first one in the world that laid out principles for governing an economy, not just in the broad sweep of macroeconomics, but with remarkable insights into why people make the choices they do, the core of economic theory.

It is this aspect of his work that links his thinking, more than two and a half millennia old, to one of the fastest-growing fields of study in modern Economics- Behavioural Economics. Popularised by University of Chicago scholars Richard Thaler and Cass Sunstein in their book Nudge: Improving Decisions about Health, Wealth, and Happiness, Nudge Theory combined learnings from the worlds of Economics and behavioural sciences to postulate that people’s choices can be influenced (or ‘nudged’) with the right set of signals, without coercing them into doing things. When applied by the government, this was called Libertarian Paternalism, in other words, allowing people freedom of choice, but ‘nudging’ them into behaviours that would be socially beneficial. For example, warnings and images of cancer patients on cigarette packets are a negative nudge to potential buyers without forcing them one way or the other. 

For his seminal work in this field, Professor Thaler won the Nobel Prize for Economics in 2017, and Nudge remains an international bestseller and an essential read for anyone who wants to understand how one can influence change in societies and individuals. However, thousands of years ago, Chanakya demonstrated a remarkable understanding of how the human psyche works, and how people can be influenced to act in a certain way. He summarised this into four principles that most Indians have heard of, but perhaps have not contemplated the broader application of. When faced with the challenge of changing behaviour, Chanakya advocated four possible strategies- Saam (requesting someone to do something), Daam (offering a reward, or in Professor Thaler’s terms, a ‘positive nudge’), Dand (a penalty or price to be paid, or a ‘negative nudge’), and finally Bhed (creating compliance through force, such as a ban on socially undesirable products). 

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I live in Mumbai, and sometimes one sees these principles in play in the unlikeliest of places. On Juhu beach, the walls of adjoining properties have images of Hindu gods and goddesses drawn on the walls, a ‘nudge’ to those who would have otherwise habitually urinated on the walls. That may have worked, but perhaps we need to provide a ‘nudge’ to those who habitually litter the beach with the detritus of bottles and wrappers. The Saam of signs requesting them not to litter clearly doesn’t work, so perhaps the authorities should think of a different ‘nudge’- perhaps levying a fine (Daam).

That is just a small example of where we could apply these principles in everyday life. Ultimately, our progress as a society, and as a nation, depends on people adopting new behaviours, and letting go of old ones that are holding our progress back. From pollution by industries to corruption, to cheating in exams, there is no shortage of issues that hold us back from realising our potential as a nation. A potential we got a glimpse of in the so-called ‘golden age’ of the Mauryas, when India was the world’s leading economy, under the sagacious leadership of rulers like Chandragupta Maurya, backed by the wisdom of Chanakya.

Many Indians, including those in power, are perhaps not aware of Professor Thaler’s work, and indeed adopting esoteric ‘Western’ principles into policymaking may be both hard to sell politically and to implement. However, every Indian knows of Chanakya and the Arthashastra. Instead of relegating his wisdom to history books, TV serials, and the occasional news headline that links his genius to petty political maneuverings, we would do well to imbibe his true wisdom of how human behaviour can be influenced and apply it to nudge our everyday life and choices for the better.

Modern Nobel Prize winners and thought leaders are feted with recognition and by being featured on the cover of magazines. Chanakya would perhaps have abhorred such recognition, preferring to ‘nudge’ from behind the scenes. However, I am sure he would have approved of us tapping into the rich thinking and heritage of our past to help create a better future and realise our unfulfilled potential as a nation. After all, as he wrote in the Arthashastra, “Never settle for anything less than what you deserve. It’s not pride, it’s self-respect.”

Aaditya Sengupta Dhar

Guest Author