4 Interest Rates From 300 BCE That Run Modern Finance
Support the channel - https://ko-fi.com/withronny Around 300 BCE, an Indian text wrote down a four-tier, state-enforced interest-rate schedule — 15%, 60%, 120%, and 240% a year — graded by the risk of the loan. It is one of the oldest codified risk-pricing systems ever found, and it sits in Book 3, Chapter 11 of Kautilya's Arthashastra: a treatise lost for over a thousand years and rediscovered by R. Shamasastry in a Mysore library in 1905. This is Episode 2 of The Chanakya Algorithm. We walk the risk ladder rung by rung, the debt-versus-equity distinction (prakṣepa), the usury cap and its statutory penalty, the deposit-liability clause, and the line stating that the kingdom's welfare depends on the relationship between creditors and debtors — then trace how James Mill's 1817 History of British India erased the very possibility of Indian economic thought before the text even resurfaced. We flag what's contested: the Arthashastra did not invent risk-priced lending (Greek bottomry is contemporaneous), and the text's date and authorship are debated. Both are addressed in the video. — SOURCES — PRIMARY TEXT Kautilya, Arthashastra, Book III (Dharmasthīya, "Concerning Law"), Chapter 11 (Ṛṇādāna, "Recovery of Debts") — the four-tier interest schedule and the creditor-debtor scrutiny clause. EDITIONS & TRANSLATIONS R. Shamasastry (trans.), Kautilya's Arthashastra, Government Press, Bangalore, 1915 (Sanskrit ed. 1909). The rediscovered Grantha-script manuscript, Mysore Oriental Library, with the commentary of Bhatta Swami. R.P. Kangle, The Kauṭilīya Arthaśāstra, 3 vols., University of Bombay, 1960–65 — the standard critical edition, with sutra/verse numbering. Patrick Olivelle (trans.), King, Governance, and Law in Ancient India: Kauṭilya's Arthaśāstra, Oxford University Press, 2013. DATING & AUTHORSHIP Thomas R. Trautmann, Kautilya and the Arthaśāstra: A Statistical Investigation of the Authorship and Evolution of the Text, E.J. Brill, Leiden, 1971. Mark McClish, The History of the Arthaśāstra, Cambridge University Press, 2019. GREEK COMPARISON (bottomry / maritime loans) Demosthenes, Oration 35 ("Against Lacritus") — the only surviving ancient Greek maritime-loan contract; rates of ~22.5% (peace) and 30% (wartime). Sidney Homer & Richard Sylla, A History of Interest Rates, 4th ed., Wiley, 2005. COLONIAL HISTORIOGRAPHY (the named villain) James Mill, The History of British India, London, 1817. MODERN RISK THEORY (the inheritors) Daniel Bernoulli, "Exposition of a New Theory on the Measurement of Risk," 1738. Harry Markowitz, "Portfolio Selection," Journal of Finance, 1952.
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