Islamic Economics in the Light of Quran o Sunnah

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    ISLAMIC

    ECONOMI

    C SYSTEM

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    CurrentDebateAmongMuslims

    What was there in the message of Islam which changed the course of human history?

    Does this message have the same power, relevance and importance today as it didfourteen centuries ago?

    As we have seen, non-Muslim historians acknowledge the power of the message ofIslam, in its historical context !owever, they "elieve that this power was availa"le insimpler times, and is no longer relevant to the complex modern world #he simplemessage of Islam no longer has the power to radically transform human lives andliving experience, and to change the course of history

    $adly and unfortunately most Muslims have also come to agree with this westernanalysis #hey "elieve that progress of Muslims today depends on mastering%hemistry, &iology, and 'hysics, and on ac(uiring democratic governance,industriali)ing, and generally imitating developments in *urope over the past threecenturies or so

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    Scarcity inIslamic &WesternView

    +$carcity is at the heart of economic theory If there is ana"undance of all material wealth, then there would "e no need todiscuss economic issues

    After agreement on this fundamental issue, Islamic economics andconventional Western economics part ways

    #he Westernanalysis of the causes of scarcity, how to handle thepro"lem, and the conse(uences of solving the pro"lem are radicallydifferent from Islamic views #he purpose of this note is to discussthese differences and argue that the Islamic views are superior, andin accordance with o"servations

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    Selfishness &Greed orCooperation?

    *conomic text"ooks teach us that men "ehave purely selfishly

    Islam teaches us that men have "oth the tendency towards evil, and thecapa"ility of "eing good

    When we look at the world, we o"serve very large amounts of charita"le,compassionate and self-sacrificing "ehavior, which violates the teachings ofeconomics theory &ecause of the wrong predictions of economic theory,economists are almost always surprised "y the results of the ultimatum game,which show that human "eing often choose to take a loss rather than "etreated unustly .%amerer /0012

    #hus, empirical evidence strongly favors Islamic views over those taught incurrent conventional economic texts

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    Comparison withNeoclassicalViews

    *conomics text"ook agree with the idea of men "eing motived "y thelove of worldly possessions expressed in verse .314562

    !owever, neoclassical text"ooks do not mention the possi"ility of

    .317472 8 that men may "e generous enough to give to others evenwhile "eing poor themselves

    Money donated to charities forms a significant component of the 9D'in most countries, and charita"le "ehavior is an important element ofthe social safety network for the poor

    #he 3uran places great emphasis on spending for the needy, "ut thereare no chapters on charity in neoclassical text"ooks

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    ComparisonwithNeoclassicalVie

    &ecause of their single minded focus onselfishness, some economists have even

    attempted to explain altruism as emerging fromselfish motives .if we help others, they will helpus in times of our need2

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    TheNeeds &WantsDistinction

    Islam encourages fulfillment of needs : discourages fulfillment of idledesires

    %onventional economics does not make such a distinction

    #he Islamic view matches o"served "ehavior and is essential for sustaina"ledevelopment

    #he luxurious lifestyles currently "eing pursued "y the rich are causing

    tremendous amounts of environmental damage and can neither "e sustainedinto the future, nor can they "e shared with the masses

    #hus Islamic views offer greater wisdom than is contained in currentconventional economic text"ooks

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    IslamicViews onNeeds &Desires

    ; %hildren of Adam< #ake your adornment ."y wearing your clean clothes2,

    while prayingand going round .the Tawafof 2 the =a>"ah, and eat and drink "ut

    waste not "y extravagance, certainly !e .Allah2 likes not those who waste "y

    extravagance2 . $urah Al-Araf 4 152 !uman needs are limited

    Wants or desires are unlimited

    If Adam>s son had a valley full of gold, he would like to have two valleys,for nothing fills his mouth except dust .of the grave2 And Allah forgives himwho repents to !im

    .Al-Bukhari: Volume 8, Book 76, Number 447)

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    NeoclassicalTheoryRejectsNeeds &WantsDistinction

    %omplex historical processes starting with the corruption of the %atholic

    %hurch, su"se(uent emergence of 'rotestant sects, and their violent fights

    with each other, led eventually to the reection of faith in *urope

    In accordance with the !adeeth that the life of this world is a prison for

    "elievers "ut heaven for the un"elievers, one of the high priorities of secular

    thought has "een to "uild heaven on earth, "y pursuing wealth and desires

    as much as possi"le

    #here is a tension "etween pursuit of selfish desires and social harmony,

    and resolving this was one of the maor issues tackled "y secular political

    philosophy in *urope

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    NeoclassicalTheoryRejectsNeeds &WantsDistinction

    While religious thought condemns selfish "ehavior, a secular worlddemanded a philosophy to ustify freedom to pursue self-interest so as to"e a"le to enoy a heaven on earth .which would replace the heaven inafterlife promised "y religion

    #he invisi"le hand was the first such philosophy, which suggested thatselfish "ehavior would lead to socially optimal outcomes $u"se(uentdevelopments have also "een motivated "y the need and desire to ustify

    the maximum amount of freedom for all economic agents

    As 9al"raith recogni)ed4 +#he modern conservative is engaged in one ofman>s oldest exercises in moral philosophy that is, the search for a

    superior moral ustification for selfishness

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    NeoclassicalTheoryRejectsNeeds &WantsDistinction

    In economic, political, and social domains, secular Western thought has "eendriven "y the idea of giving as much freedom to individuals as possi"le

    Within economic theory, ustification of free markets has "een a central concern#he %hicago school and Austrian economists represent a polar extreme indefending free markets even in the presence of monopolies, externalities and othermarket imperfections

    #he 9reat Depression of 57/7 led nearly everyone to the clear recognition that freemarkets can lead to catastrophic performance and misery for millions, and madesocialist and communist solutions to economic pro"lems appear attractive to many

    =eynes rescued the free market "y providing a theory which suggested that freemarkets would function well as long as the government ensured full employment

    "y fiscal or monetary policy

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    Causes ofScarcity

    ;ne Western diagnosis for the reasons for scarcity is that there are

    too many people #his was initiated "y Malthus, and the ideacontinues to guide policy to this day

    #he 3uran explicitly denies this idea, and states that 9od sends

    sustenance for all his creation

    Misguided Western policies "ased on the idea of surplus peoplehave caused tremendous damage, as well as degrading and devaluing

    human "eings

    Islamic views accord with the empirical data which shows that foodsupplies have kept up with population, despite tremendous increasesin population

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    IslamicView:God isBountiful

    #he 3uran tells us clearly that we need not fear that population willexceed the food supplies4

    And kill not your children for fear of poverty We provide for them

    and for you $urely, the killing of them is a great sin .$urah Al-Isra 4152

    #o each these as well as those We "estow from the &ounties of yourord And the &ounties of your ord can never "e for"idden

    .$urah Al-Isra4 /02 \J \S@ \J SX z[ {|} P B \H _ ~@^ Z@_CZ[\H @J V @XT

    X.12

    http://tanzil.net/http://tanzil.net/
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    IslamicView:God isBountiful

    X Z@XO X P B \H PJ J {|} J ` J X @Q @J { J X Y T B P ` Z[ {|} C @ Q ][ @ J P ` {|} .Z@U2 J T Z[ z[ ./72

    Islamic scholars have concluded from these, and other verses, that there is

    no scarcity at the level of needs, contrary to the views of Malthus and hisfollowers

    #his is also in accordance with the data, which shows that the food topopulation ratio has remained remarka"le sta"le, despite tremendous

    increases in population

    Men informed "y the 3uranic vision would not have made the policymistakes documented in the pr