The purpose of this paper is to establish Kautilya as a genuine contender to be a forerunner of the neoclassical price theory.
Rational reconstruction approach is used to present Kautilya's understanding of several most basic concepts in economics.
Kautilya's understanding of the law of diminishing returns is at par with the classicists. His applications of concepts like opportunity cost, and of demand and supply framework, are closer to those of the neoclassicals. His understanding of the rules (axioms) of comparison and consistency and the exploration of substitution possibilities is way ahead of the classicists.
The current research in the history of economic thought concentrates too heavily on the exploration of Western history of economic thought.
Kautilya's Arthashastra is a new source of knowledge and the profession should encourage the exploration of other ancient contributions outside of Europe.
The paper revises the history of economic thought.
