Kautilya had organized a huge and intricate network of bureaucracy to manage the Mauryan empire. This also reflected the centralized character of the state. Bureaucracy had thirty divisions each headed by Adhyakshas (Chiefs). Reporting relationships were clearly specified. Kautilya had visualized the necessity of state provision of public goods which strengthened trade and commerce. The bureaucracy was involved in the provision of three of such goods – the ‘quality control machinery’, the system of currency, and the system of ‘weights and measures’. Quality control was a revolutionary concept for that era. This suggests that Mauryan empire had an active trading sector and the buyers (domestic and exports) were discerning. As a mark of quality, merchandise had to be marked with the Abhigyan Mudra (state stamp) in sindura (vermillion). Counterfeiting was strictly punished . Bureaucrats received a fixed pay and were also eligible for state subsidized housing. This is an example of Kautilya’s deep understanding of statecraft as even in later centuries (in other empires), officials were expected to compensate themselves by retaining a part of revenue extracted from the people (a kind of ad-valorem compensation). The ad-valorem arrangement provided an incentive for the official to squeeze the tax payer as much as possible (a short term on the part of the bureaucrat) as the bureaucratic tenure was not hereditary. Kautilya, given his experience as a Chief Minister, probably realized the peril of such an (ad valorem) arrangement and created a fixed pay compensation structure for the bureaucracy.36 Huge bureaucracy invariably result in a principal-agent problem. Kautilya sought to tackle this issue through three means – elaborately monitored standard operating procedures (SOPs), spies/intelligence organization, and decentralization of authority. SOPs minimized the room for subjective interpretation of the rules by the bureaucrats. The superiors carefully monitored the performance of the officials under their control.37 However this system of close monitoring must have resulted in enormous transaction costs. It was therefore supplemented by the intelligence organization which kept a watch on the corrupt practices of the officials. The exploits of the spies in catching corrupt officials were given wide publicity and this made the officials careful in their dealings with the citizens. Another measure to keep a check on the bureaucracy was decentralized-polycentric political arrangements which resulted in empowering of the local guilds. Thus the bureaucrats had to reckon with an effective local power center who were aware of the royal edicts and prevented the bureaucrat from substituting his/her objective function for the royal edict. It is interesting that Kautilya did not take recourse to ideology to discipline the bureaucracy. Probably he realized that if a bureaucrat is violating the SOPs he/she is already going against his dharma.

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