The Education of an Economist

In our PhD Economics program at Stanford, we learnt nothing about the history of major economic events of the twentieth century. Instead, we were taught the rather arcane and difficult skill of building models. In order to analyse what would happen in an economy, we learnt that you have to construct an artificial economy, populated by rational robots called homo economicus, who behave according to strict mathematical laws. At no point in our studies were we asked to match what happens in our models with any events in the real world; it was assumed that the two always matched. This process of economic modelling permits us to provide exact mathematical answers to a vast range of questions one might ask about the economy. This is undoubtedly a powerful technique, which has earned economics the name “Queen of the Social Sciences”. Our poor cousins in political science, psychology, sociology, geography, and so on, have to study the more complex real world, and cannot offer anything comparable. Nonetheless, the power of mathematical modelling derives from the extremely unrealistic assumption that real world events and human behaviour can be predicted by mathematical formulae. Thus, the precise predictions of economists are often dramatically contradicted by real world outcomes. As Nobel Laureate Paul Krugman remarked after the global financial crisis took economists by surprise: “the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.”

My own education in economics began many years after graduate school, when I chanced across a copy of Economics and World History: Myths and Paradoxesby Paul Bairoch. Bairoch’s book challenged one of the holy cows of economic theory, that free trade is always a superior policy for all parties. Believing in free trade is a hallmark of economists — a recent survey showed that 90 per cent of economists believe in it, while only 20 per cent of the general public believe that free trade is always optimal. So it came as a shock to me when Bairoch discussed many historical episodes to show that free trade had caused harm to the less developed nations, by preventing development of industries, and also by creating unemployment. Many nations with strong industries had built them up under the umbrella of protection, contrary to free trade principles. This historical evidence was strongly in conflict with the mathematical demonstrations of superiority of free trade that I had learnt in graduate school. In bewilderment, I asked several of my mentors, very senior and respected economists, about this. I was even more surprised by the responses I received. None of them were familiar with the historical evidence, and furthermore, they did not find it relevant. They argued that if protection provided good results, then free trade would have provided even better results. The mathematical proofs were impervious to empirical evidence.

Economists do not study history because it is a record of particular events, while they search for universal scientific laws, which would be equally valid among the Aztecs and the Zulu, in the nineteenth century and in the twenty-first. I realised that the laws of economics hold only in an imaginary world populated by robots, and that to learn real economics, it was necessary to study history, which I had bypassed in graduate school. It was only after many years of detailed historical studies of real world economic events that I came to realise that nearly everything I had been taught in graduate school was wrong.

Recent historical events have shaken the faith of many true believers in free market economics. A landmark 2013 study by Autor, Dorn and Hanson, found that competition from China has destroyed jobs and lowered wages in many US industries, especially manufacturing. Contrary to economic theory, which states that the displaced labourers will find better jobs in different sectors, workers displaced by Chinese competition often went on the government dole. A large group of heterodox economists, students and laymen are becoming increasingly aware of the lack of realism, ideological bias, and lack of concern with poverty and inequality, which are hallmarks of modern economic theory. However, dissent is weak and dis-united, while orthodoxy is firmly entrenched in the halls of power. The task of creating a new economics remains as essential as it is undone. 

This article has been published in Express Tribune, and posted in various blogs. For more personal information about me, see my personal website: asadzaman.net/about-me/. In particular, one of my most popular videos has been short 22min talk in memory of my late father Mohammad Masihuzzaman. For a brief autobiography, see Insight Interview: The About Me section of my personal website records my professional journey (education/career), while the main page records my intellectual progress.

Advertisements

The Big Bang

The article below was published in the Intellect Magazine in 2012 and is addressed to a Muslim audience. It explains how, in the creation of the universe, there is a sign of the Creator for those who (chose to) understand. Secular atheists have been trying for centuries to disprove the existence of God, and to discredit religion. They have failed in this effort on multiple fronts, and in the process have created a whole new range of arguments for the existence of God, and for the validity of religion as an essential dimension of human existence. This leads to a new form of Ilm-ul-Kalam, modern arguments for God and Islam, which Muslim scholars need to learn, understand, and exposit, in order to combat the rising tide of atheism in the Islamic world.  This post is just one piece of a much broader range of modern cosmological arguments which provide strong evidence for the existence of a Creator. For a deeper argument based on understanding of modern physics, see: William Lane Craig and James D. Sinclair: The Kalam Cosmological Argument. A short version of this post addressed to a secular audience was published in the Express Tribune on 4 Ramazan 1436, and also shared on Linkedin

The Big Bang (long version, for Muslim audience)

Introductory Remarks: All of us who receive a western education absorb a European worldview which is hidden beneath the surface in textbooks and histories that we read. Many elements of this worldview are opposed to Islamic views. For our purposes in this essay, the most important of these changes was the transition from Christianity to secular thought that occurred in Europe. Whereas Christianity, like Islam, holds that religion is central to all human activity, secular thinking holds that religion is a private affair, and should not interfere with the public domain. Secular thought is well illustrated by a comment of famous French mathematician and astronomer Laplace.  He said that he did not mention God in his book discussing the orbits of Jupiter and Saturn, because he had no need of that hypothesis. It did not occur to him to wonder why the sun and the moon follow exactly computed courses, obedient to the orders of Allah, as described in Surah Rahman. The forces of gravitation, and other factors in the design of the universe, are so precisely balanced, that it is impossible to imagine that this degree of precision could have occurred by chance. There is overwhelming evidence that the universe has been designed so as to be hospitable to human life, exactly as asserted in Islamic teachings.  The comment of Laplace is a good illustration of the ayat (2:257) …”As for those who deny God, their friends are the evil ones. They bring them from light into darkness

The Quran (2:164) states that “in the creation of the Heavens and the Earth and the difference between day and night are the signs for those who think.” If we were to come upon a precision designed machine with interconnected parts all working harmoniously together to perform functions vital to our existence and survival, we would not imagine that this machine had been thrown together by an accident. Yet this is precisely what atheists believe, and propagate as a subtext within apparently neutral scientific texts. For example, a leading atheist Bertrand Russell stated that humans are “the outcome of an accidental collocation of atoms.” Atheists routinely deny miracles associated with the prophets, but the miracle they believe in, the accidental creation of a universe perfectly designed to be suitable for human existence, is far far more unlikely.

Sometimes, the evidence is so strong that it breaks through the barriers of unbelief. For example, one of the discoverers of the genetic basis of human life, Crick was quoted as saying, ‘An honest man, armed with all the knowledge available to us now, could only state that in some sense, the origin of life appears at the moment to be almost a miracle, so many are the conditions which would have had to have been satisfied to get it going.” Very unwillingly, against his atheistic beliefs, Crick gave testimony to what the Quran (Surah Al-Waqi’ah 57-58) asserts as challenge: In the creation of man, and the seed from which man is created are signs which cannot be denied by those who reflect. Just like many nations mentioned in the Quran, Crick continued to deny God even after witnessing the miracles of creation.

How did it come to pass that secular western scientists became hostile to religion, and continue to spend a huge amount of time trying to find alternative explanations for the fantastic wonders of creation which they keep discovering? For example, instead of coming to believe in God, Crick invented the ridiculous theory of “panspermia”: Crick proposed, in a book called Life Itself, that some form of primordial life was shipped to the earth billions of years ago in spaceships—by supposedly ‘more evolved’ (therefore advanced) alien beings. The question of how that alien life got started is not explained.  Note that this theory was proposed because the Nobel Prize winning scientist could find no satisfactory explanation for the presence of life on Earth without a Creator. The resistance shown by scientists to evidence is similar to that of the nation of Saleh. Even after being shown their requested miracle of a she camel emerging from stone and giving birth, they refused to believe in God.

The full story of why European scientists are so opposed to religion is too complex to describe here (it is sketched in my paper on The Deification of Science and its Disastrous Consequences, and I will try to writeup a simpler version later). However one important ingredient in this story is the absorption of Greek philosophy into the teachings of the Catholic Church. Greek philosophy and science contained many theories which have been proven to be false. One of these was the idea that the Earth is the center of the Universe. Discoveries that this is false by Copernicus, Galileo and others, based on works of Muslim astronomers, came into conflict with the teachings of the Church. There was a bitter fight between the Church and science, which was eventually won by the scientists. However, burning and torture of scientists by the Church created an animosity between the two parties which continues to this day. Scientists continue to publish books using fallacious arguments lying outside their fields of specialty to deny the existence of God. The general nature of such arguments is as follows: we can explain how xyz happens (how the universe was created, how man was created, etc.) and therefore God does not exist. This argument is similar to saying that I can explain how an automobile functions, and therefore no one designed and created it. In this article we will examine just one case where the scientists were compelled to change their minds, but nonetheless refuse to face the consequences of the evidence that has emerged for the creation of the Universe by God.

Before proceeding to discuss this evidence, it is worth noting that Islam was saved from suffering a similar fate by Allah, who has promised to protect and preserve His deen. The Mu’tazila group was deeply influenced by Greek philosophy, and argued that “reason” (by which they meant Greek philosophy) was on par with the revelation from Allah. They convinced the Khalifa Haroun Al-Rasheed, and he attempted to enforce this position on the Muslims as a whole. It was only the heroic resistance of a few Ulema which saved the day, and preserved the purity of the teachings of Islam. Had the Mu’tazila succeeded, Greek philosophy would have been absorbed into Islamic teachings with the same disastrous results that occurred in Christianity. Modern scientific findings opposed to Greek science would have been taken as evidence against Islam. As it is, the original teachings of Islam are in remarkable conformity with modern scientific findings, as many books and articles have noted.

Main Article: A question which generated intense debate between secular and religious faction in Europe is the following: Is there design in the creation of the universe, or did we come into being due to a cosmic accident? So much hinges on the answer that only ostriches would refuse to face it. If we were created by a random evolutionary process following a chance combination of atoms in a primordial soup, then our lives have no meaning. We live in a cold and callous universe, and all our struggles, passions, sacrifice, and devotion make no difference in the end. Contemplating the ultimate futility of all human effort, Bertrand Russell, one of the founding fathers of atheism as a philosophy, said that “only on the firm foundation of unyielding despair, can the soul’s habitation henceforth be safely built.”

This is in stark contrast to the Islamic view of a universe created by God, where the trees and the stars worship their Creator, and the sun and the moon follow exquisitely designed laws. Even an atom’s worth of good that we do will be rewarded, while evil will meet with either the Mercy or the Justice of God.

Because of their opposition to Christianity, scientists were as firmly committed to the idea of an eternal uncreated universe as believers were to the creation of the Universe by God. This being a theological dispute, neither side expected to find supporting empirical evidence for their beliefs. The emergence of convincing evidence for the creation of the universe from nothing was the most surprising discovery of the twentieth century.

Einstein’s celebrated theory of General Relativity led to the puzzling prediction that an eternal and static universe would collapse to nothingness under the forces of gravitation. To resolve this difficulty, Einstein posited a ‘cosmological constant,’ a force that opposes gravity and keeps the universe from collapsing. Russian physicist Alexander Friedmann and Belgian Georges Lemaître both independently discovered that if the universe was expanding, instead of being static, there would be no need for this arbitrary assumption, which had no empirical support. Einstein was so committed to the idea of a static and eternal universe that he publicly ridiculed both of these scientists, who were then ignored and forgotten.

The Quran (56:75-76) swears by the positions of the stars, and asserts that this is a tremendous oath, if we only knew. The positions of the stars provide extremely strong evidence for the creation of the universe. Observations of these positions by astronomer Edwin Hubble showed that distant galaxies were racing away from us at higher speeds, in conflict with the idea of a static universe. Hubble’s Law not only showed that the universe was expanding, but also that it must have had an origin – a point in time at which it was created. Einstein was so surprised that he visited Hubble at Mt. Wilson observatory, and looked for himself before admitting his mistake. He later stated that the “cosmological constant” had been the biggest blunder of his career.

Other scientists were not so easily converted. British scientist Fred Hoyle fanatically strove to develop models of an eternal and static universe consistent with the empirical evidence. He labeled the alternative theories as ‘irrational and unscientific,’ saying that the  idea that the universe originated in a “Big Bang” was ridiculous. It is ironic that his term of ridicule went on to become the accepted name of this theory. Scientists strongly resisted the big bang because it creates uncomfortable questions about who created the expanding universe. The Quran (51:47) answers this question clearly: “And it is We who created the universe with [Our] power; and, verily, it is We who are steadily expanding it.”

In the meantime, evidence in favor of the Big Bang continued to accumulate. George Gamow had calculated that an explosion which created the universe would leave its marks in the form of a detectible and pervasive microwave radiation. When this radiation was eventually discovered, New York Times published the news in 1965 as the discovery of the century. A satellite launched in 1989 brought in even more convincing evidence. There were variations in this microwave radiation, exactly as predicted by the Big Bang model of the universe’s origin. The famous atheistic physicist Stephen Hawking praised it as “the greatest discovery of the century, if not of all time.” Since then, scientists have been working furiously on trying to explain how something could spring out of nothing without a Creator who caused it to happen.

At this time, the universally accepted cosmological model posits the existence of a void – no matter, no light, no energy, no space-time continuum, nothing at all. Suddenly, from nowhere, in an explosion emanating from a single point, the entire universe, together with space, time, and the laws of physics came into existence. Why? Scientists don’t have a clue. Islam, on the other hand, provides an answer: “God said Be, and It is.”

فَلَا أُقْسِمُ بِمَوَاقِعِ النُّجُومِ وَإِنَّهُ لَقَسَمٌ لَّوْ تَعْلَمُونَ عَظِيمٌ

TBB6

Understanding Macro: The Great Depression (1/3)

Preliminary Remarks: “The trouble is not so much that macroeconomists say things that are inconsistent with the facts. The real trouble is that other economists do not care that the macroeconomists do not care about the facts. An indifferent tolerance of obvious error is even more corrosive to science than committed advocacy of error.” From The Trouble with Macroeconomics (Paul Romer)

I do not understand why indifference to error is worse than committed advocacy. Tor an illustration of committed advocacy of error, see postscript below on 70 years of economists’ committment to a fallacious theory. Furthermore, the problem is not confined to macro. Microeconomists are also dogmatically committed to utility maximization, when in fact this hypothesis about consumer behavior is solidly rejected by empirical evidence; see: The Empirical Evidence Against Neoclassical Utility Maximization: A Survey of the Literature

For the Islamic WorldView Blog, let us understand that modern economic theory is a pure fantasy, and let us provide a realistic alternative based on Islamic foundations.

Understanding Macro: The Great Depression

Published in The Express Tribune, February 21st, 2018.

Due to frequent headlines, there is a substantial public awareness of core macroeconomic issues like unemployment, trade agreements, exchange rates, deficit, taxes, interest rates, etc. However, even professionals are often ignorant of the intellectual battles which have shaped modern macroeconomics, since this is not taught in typical PhD programmes in economics. This article attempts to provide the history of ideas which led to the emergence of macroeconomics, since this is an essential background required for informed analysis of these issues.

Lord John Maynard Keynes invented the entire field of macroeconomics in response to the Great Depression in 1929, which could not be understood according to economic theories dominant until then. According to the classical economic theory, forces of supply and demand in the labour market would ensure full employment. Keynes starts his magnum opus, The General Theory of Employment, Interest, and Money, with the observation that the economic theory cannot explain the long, persistent and deep unemployment that was observed following the Great Depression. Keynes set himself the goal of creating a theory which could explain wide fluctuations in levels of employment that he observed. He discovered that creating such a theory involved rejecting deeply held convictions, central to economic theory.

The first of these new ideas is the failure of supply and demand theory in the labour market. According to conventional economics, unemployment represents an excess supply of labour. When there is excess supply, the price of labour, or the wage, will go down. This will encourage firms to hire more labour and also discourage people from working, increasing demand and decreasing supply, until the two are equalised at equilibrium. The Great Depression made it obvious that this theory did not work. Keynesian economics was created to explain this failure of supply and demand. Unlike conventional economists, who address such problems by doing mental gymnastics using mathematical models, Keynes looked at the economic conditions in the real world around him to find the answers to this puzzle. He observed that there was a huge strike by coal miners in England against a proposal to cut their wages. But there were no strikes against high inflation, which also reduces the real wages of the workers. Economic theory says that the two — decline in nominal wage, or an increase in prices of consumer goods — will have exactly the same effect on the labour supply. Keynes was able to see, unlike economists who hold their theories to be sacred, that his economic theory must be wrong. The supply of labour does not respond to real wages, but only to nominal wages in the short run.

After pondering as to why this might be the case, Keynes realised that it was because the real wage was determined by factors outside the control of firms and workers, due to the complex structure of the economy. Even if both firms and workers agreed to reduce nominal wages, this could lead to a decline in prices such that the real wage would not go down, preventing the mechanism which brings supply and demand into equilibrium from operating. This realisation led Keynes to two other major insights. If firms and workers negotiate in terms of money wages, rather than real wages, then the amount of money in the economy is extremely important. This contradicts the famous Quantity Theory of Money, according to which the amount of money is just a veil, which has no bearing on the real economy. Furthermore, Keynes argued the firms’ decisions about investment, and hire of workers, depended crucially on their expectations about the future. These expectations were not anchored by any real factors and could fluctuate greatly in response to many different types of stimuli. In particular, he argued that investments were governed more by the type of gambling involved in day-trading, and less by reasoned calculation of long-term yields. This suggests that wise long-term future investments require government interventions, contrary to free-market dogma.

Although Keynes succeeded in his long struggle to escape deeply held convictions created by classical economic theories, he could not succeed in making his fellow economists see the light. He complained that “professional economists… were… unmoved by the lack of correspondence between the results of their theory and the facts of observation.” Hicks and Samuelson cobbled together an uneasy compromise between classical theories and Keynesian ideas, which became known as Keynesian economics, even though it rejected nearly all of the central insights of Keynes. It was in response to this massive misinterpretation that Keynes said that “I am not a Keynesian.” Only one Keynesian insight survived the Hicks-Samuelson misunderstanding of Keynes: the government must take active steps to eliminate unemployment, since the forces of supply and demand will not do so. But even this little piece of Keynesian theory was enough to change the world dramatically.

Keynesian macroeconomics uses two tools to eliminate unemployment. Fiscal policy involves the government directly investing in public works to create employment, while monetary policy involves printing more money to stimulate creation of demand by the private sector. Keynesian policies advocate deficit spending and expansionary monetary policy. This runs counter to widely accepted and commonly held beliefs that governments should practise ‘austerity’ in recessions. Strangely enough, this ideological battle continues today, where the IMF continues to recommend austerity to the poor countries, while the rich countries combat recessions with expansionary Keynesian policies. These theoretical conflicts cannot be understood until we dig beneath surface appearances and ask which social groups benefit from which type of policy.

It should be immediately obvious that active government involvement in creating full employment helps the bottom 90%. It is slightly less obvious that monetary expansion, which may create inflation, is also helpful to the poorer segment of society. This is because the poor are generally borrowers of money, so the value of their debt in real terms becomes reduced. Similarly, easy money makes it easier for them to borrow. At the same time, Keynesian policies hurt the top 1%. This is because government guarantees of full employment makes the position of labour strong vis-à-vis the corporations, increasing the share of profits going to labour, and reducing business profits. Also, the wealthy make money by lending, so easy money lowers their profits from extending loans. It is this underlying power struggle, the eternal battle between the rich and powerful against the poor masses, which is hidden beneath the surface of the mathematical complexities of modern macroeconomics.

(To be continued) 

POSTSCRIPT: Amazingly, exactly the same conflicts that Keynes encountered between the economic theory and reality continue today, with economists stubbornly sticking to theories solidly refuted by facts. One of the leading textbooks in Labor Economics by George Borjas presents exactly the same model of supply and demand equilibrium, thoroughly refuted by empirical evidence. He makes no mention of the fact that Keynesian theory rejects the idea that supply and demand lead to equilibrium in the labor market; there are no references to Keynes in the entire book, justifying the Keynes quote that economists are unmoved by the lack of correspondence between their theories and the facts. Borjas does mention, with obvious reluctance, the strong evidence against S&D in labor market presented by Card & Krueger in Myth and Measurement. Then he goes on to the following, amazing, dismissal of facts in favor of theory:

We do not yet fully understand why the recent evidence differs so sharply … , and why the implications of our simple-and sensible supply and demand framework seem to be so soundly rejected by the data. One plausible reason is that  … (large number of implausible waffles, which have been rejected by Card & Krueger in later articles defending themselves from these critiques). (p 143, 3rd Edition)

Borjas follows standard axiomatic economic methodology, in which there is no room for the possiblity that observation of facts to the contrary may lead to revision of theory. As Keynes observed: “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight as the only remedy for the unfortunate collisions which are occurring.”

For more on this topic, see my lecture L08 of Advanced Micro II on”70 Years of Economists’ Failure to Understand the Labor Market.” This webpage provides slides, summary, and transcript of the lecture. A 90m YouTube Video-Recording of the lecture is also linked below:

An Islamic Approach to Microeconomics

Last semester at PIDE, I taught Advanced Microeconomics I, the core M.Phil./Ph.D. course for Micro, using an Islamic approach to both style and content. The entire set of 30 lectures, with videos of lectures, slides/lecture notes, and other relevant reference materials, are available from the website for the course at Advanced Microeconomics (PIDE). This post provides a brief description of the first lecture, followed by a link to a video-recording of it, followed by a more detailed outline, based on the lecture slides.

Brief Description of Lecture: 

This introductory lecture describes how Western approaches to knowledge are drastically different from Islamic approaches. In early 20th Century Western approaches matches Islamic approaches in that both aimed at the development of human beings. However, this dimension of character building, leadership training, recognition of social and civic responsibilities, development of spirit of service, sacrifice, and engagement with communities and world was lost in the West. See Julie Reuben: The Making of the Modern University: Intellectual Transformation and the Marginalization of Morality, for details. The lecture attempts to achieve three major goals, and many minor ones.

  1. Make students aware of the strong Islamic distinction (absent in the West), between useful and useless knowledge. Whereas useful knowledge is prized as infinitely precious, the Prophet S.A.W. sought protection from useless knowledge. Useful knowledge enters the heart and leads to internal transformation, which also eventually creates an external transformation in the world around us. See also Lecture on: Differences between Islamic and Western approaches to knowledge.[41m YouTube Video]
  2. Build the confidence and courage in students required to take a stance against existing economic theories being taught all over the world, from leading universities to pale imitations. This requires some discussion of Orientalism — Edward Said’s thesis that Western conquest of the globe gave them a superiority complex.The flip side of this is the inferiority complex that developed in the East due to centuries of defeat. This creates a shock-and-awe of the West which prevents students from being able to take a critical attitude towards Western knowledge, regardless of how ridiculous it is. See also: How to motivate and inspire students
  3. To achieve our goals, we will need to learn new ways of thinking about economic theories. We need to learn Meta-Theory. Instead of thinking of economic theory as a TRUTH that we need to believe and learn, we need to think of economic theory as “useless and harmful” knowledge, designed to deceive us from uncovering important truths about ourselves, and about the world around us. In this connection, see my post on RWER Blog: ET1%, an Economic Theory for the top 1%, which shows how economics serves the interests of the rich. See also, Julie Nelson: “Poisoning the Well: How Economic Theory Damages the Moral Imagination.

The 91 minute video lecture AM01 is linked below:

A detailed outline of the lecture, based on the lecture slides (available from Google Website page AM01), is given below. An ALTERNATIVE 1800 word outline of lecture, from student’s perspective: MGQ01 (Madeeha Qureshi)

Advanced Micro 1 — AM01: Introductory Lecture, Dr. Asad Zaman PIDE, 12 Sept 2017. DETAILED Outline created from the slides for the lecture.

REFLECT ON: What are your intentions in taking this course, as a student? I will discuss: What are my intentions in teaching this course as a teacher?  There are THREE main new ideas that I want to introduce students to in this lecture:

  1. There are two types of knowledge: Useful Knowledge is extremely precious, while Useless knowledge is extremely harmful.
  2. Learning Useful Knowledge creates internal personal transformation, which also leads to external transformation (changing the world). This type of learning requires us to take risks, and requires courage, confidence and trust.
  3. Higher Level Learning requires meta-Knowledge – that is knowledge about knowledge. What is the nature of economic theories? Who invented these theories? What purpose do they serve? This is an external point of view. We study economic theories as objects of study. The internal point of view takes economic theories as truths, and requires us to learn and believe them.

The Prophet S.A.W. made dua for increase in his (useful) knowledge, and also made dua to seek protection from harmful knowledge. He also described how to tell the difference:

It is narrated by Jabir R.A. that the Prophet S.A.W. stated that Knowledge is of two kinds. One which enters the hearts, and that is the useful knowledge. The other is only on the tongue (without action or sincerety) and that is argument of Allah against the son of Adam A.S.  Hadeeth 6 in Muntakhib Ahadeeth Ilmo-Zikr.

Surprising Fact for Students: Western education today is focused on, and built around HARMFUL knowledge. How can you tell?  Think about knowledge that you have acquired in your western education:

  • Has it entered your heart?
  • Has it made your heart soft? – does it create compassion and sympathy for suffering?
  • Is it useful for the conduct of your lives?
  • Does it help you to understand the world around you?
  • Can you solve problems that you face, or help others solve problems that they face?
  • Can you diagnose economic problems and suggest solutions?

Students might think that economics DOES help them, at least in terms of the last three questions posed above. We will show later in this course that this is an illusion. Economic theory is designed to deceive students into believing false theories which have the goal of protecting the interests of the rich (capitalists).

UNLIKE ALL WESTERN knowledge that Students have learned in economics There is such a thing as useful knowledge. It passes from heart to heart.  The Powerful Message delivered in the Quran changed the course of history. The nature of the message is described in the Quran:

2:151 Even as We have sent unto you an apostle from among yourselves to convey unto you Our messages, and to cause you to grow in purity, and to impart unto you revelation and wisdom, and to teach you that which you knew not

Messages to the heart cannot be conveyed by words, and that is why both the Message and the Messenger are required to deliver it. History testifies to the power of this message, which transformed the people living in Arabia from ignorant Bedouin to leaders of the world, and created a civilization which dominated the world for a thousand years. From this example, we see that USEFUL Knowledge Transforms the World, in a two-stage process. First it changes people, then the transformed people change the world.

It is easy to see that none of the Western education (that students have acquired with so much difficulty and struggle) has these properties:

  • Do you know how to change your inner world?
  • What will bring peace and contentment to your heart?
  • What will lead to anxiety and unrest?

Turning to Economic Theory as part of the Knowledge of the West. It has led to a massive increase in GNP per capits. BUT: has this massive increase in GNP per capita caused a rise in Welfare in the West? Serious and detailed research proves Easterlin’s Paradox (see: Can Money Buy Happiness?) – despite increase in wealth, “happiness” or “sense of well-being” has not increased in the West. There is no LONG RUN correlation between happiness and wealth; there is a SHORT RUN strong correlation between the two. This creates the Easterlin Paradox – because of CORRECTLY perceived short run benefits, people pursue wealth, but this bring them nothing in the long run. As the Quran says, pursuit of the material benefits of this world is the pursuit of an illusion (mata’ul ghuroor). See my article: Evaluating the Costs of Growth for a detailed explanation of how economic growth has failed to provide the benefits that it is supposed to.

Did Modern Knowledge of Social Science in the West prevent the deadly world wars, environmental collapse, extinction of thousands of species, pollution of the oceans and atmosphere, the Global Financial Crise, 100’s of major economic and financial crises, Billions of Hungry People, Massive Inequality, Wars, Injustice, Oppression, Exploitation, AbuGhraib? This knowledge does not meet the defining characteristics of useful knowledge.

For direct evidence that Economic Theory is HARMFUL Knowledge, see Julie Nelson: Poisoning the Well: How Economic Theory Damages the Moral Imagination – This paper argues that we have natural inclinations to be kind, generous towards others, make sacrifices, BUT Economic theory teaches us to be selfish, to maximize our utility, to be indifferent to others

See also my article, on how economics assumes that rational agents are the worst type of people: Homo Economicus, COLD, CALCULATING, and CALLOUS.

39:9 Say: Are those who know equal with those who know not? But only men of understanding will pay heed.

4:113  God has bestowed upon thee from on high this divine writ and [given thee] wisdom, and has imparted unto thee the knowledge of what thou didst not know. And God’s favour upon thee is tremendous indeed

20:114 High above all is Allah, the King, the Truth! Be not in haste with the Qur’an before its revelation to thee is completed, but say, “O my Lord! advance me in knowledge.”

Hadeeth: “People are like mines of Gold and Silver”  USEFUL KNOWLEDGE must teach you how to develop the potential which is contained in your heart. To be the BEST that you can be.

RECAP & SUMMARY: There exists such a thing as extremely useful knowledge. The Prophet SAW made dua for increase in his (useful) knowledge, and sought protection from harmful knowledge. In your FORMAL education, you have only received HARMFUL knowledge (pretending to be useful knowledge. This harmful knowledge poisons the heart. That is why Prophet SAW sought protection from it.

Microeconomics is not a theory about mathematics, it is a theory about HOW human being behave. Huge amount of evidence shows that this theory is false – human beings DO NOT behave in the way that micro theory tell us. If theory is false, can it give true results? Top economists CONTINUE to defend economic theory, even after they receive STRONG empirical evidence that it is false. For example, Milton Friedman said that “Truly important and significant hypotheses will be found to have “assumptions” that are wildly inaccurate descriptive representations of reality”  (see: Friedman’s Methodology: A Stake Through the Heart of Reason). For strong and direct empirical evidence regarding the failure of utility maximization theory, see my paper: Karacuka, Mehmet, and Asad Zaman. “The empirical evidence against neoclassical utility theory: a review of the literature.” International Journal of Pluralism and Economics Education 3.4 (2012): 366-414.

Economic theory is like brainwashing – it creates a strong mental conditioning or mindset, which creates a great obstacle to seeing the truth. See my post on “Learning to Think Like an Economist”. Then, in order to reach the truth, a great effort is required in UNLEARNING all of the false things that you have been taught to believe. This effort is much greater than that needed to arrive at the truth. This effort has been described by Keynes in his General Theory:

The composition of this book has been … a long struggle of escape … from habitual modes of thought and expression. The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping the old ones, which ramify … into every corner of our minds. (Keynes 1936: viii)

Contrary to what students have been taught to believe, Economics is brainwashing. Makes us believe outrageous lies. Makes it difficult to see or understand the truth. The TRUTH is easy to understand, self-evident, shines in the dark, enters the HEART. Finding TRUTH is not difficult – the difficult part is CLEANSING your HEART of LIES you have been taught to believe.

Karl Marx said that the Capitalist system not only exploits workers, but also convinces them to agree willingly to this exploitation by teaching them that this is the best possible system, and that it is futile to struggle against it. This is precisely what is accomplished by modern economic theory. It teaches students that the economic conditions around us are the best that can be achieved, given our present resources, which are “scarce”. It teaches students that capitalism has done a fantastic job in creating wealth for everyone, and has led to miraculous progress in the past century or so. It teaches us that all economic problems are created by hindrances to the operation of free markets, both by well-meaning individuals and by powerful and corrupt governments. It teaches that “perfect” competition is the ideal system, where any individual is small and powerless to affect market outcomes. Systems where small firms grow large and wield market power are harmful.

The modern capitalist system, which we seen in operation around the world, leaves billions of people hungry, when they sleep at night. Economists are taught that this is due to “scarcity”, there is insufficient food to feed them all. This is a LIE. Empirical evidence shows that there is enough food to feed everybody, and (contrary to Malthus) food supplies have more than kept us with the rapidly expanding population. See my essay on Normative Foundations of Scarcity, which shows that scarcity exists only if we assume (as economists do) that needs backed by money (like that of the wealthy for expensive luxury goods) have priority over needs of children for food, if they are not backed by money to pay for the food.

Another important lie taught by modern social science is that one man cannot change the world, which is ruled by iron laws which all must follow. Students are made to believe that they are small and insignificant, and powerless to change the HUGE and powerful forces arrayed against them in the World.

It is the TEACHERS’s JOB to revive inner confidence in students. Every one of them is unique and precious, and has the capability of changing the world. The Quran tells us that if you save one life, it is as if you have saved all of humanity. Making students believe in themselves, in striving to develop their hidden potentials, is difficult, because Capitalist education is designed to train students to be inter-changeable workers.  Students are educated to believe that purpose of knowledge is teach them skills to get a job, which will increase the value of their life. Without suck skills, they are worthless as human beings. This is true all over the world, but in the poor countries there is an additional poison which operates to destroy the students’ courage and confidence.

Centuries of defeat and exploitation by a vicious colonial system designed to systematically loot the colonies and enrich Europe have left deep marks on the psyche of both parties. Edward Said’s “Orientalism” explains how the conquest of the world through colonization created a superiority complex in the West. Correspondingly, being defeated, conquered and exploited created an inferiority complex in the East. See “Is Development the Accumulation of Wealth?” for an essay which provides some antidotes to this inferiority complex. Among my most popular videos is an 80min first lecture (BE L01 URDU) which seeks to inspire and motivate students.

Because of this defeated attitude, students do not question ridiculous theories of behavior, instead accepting them as gospel truth from the West. Despite strong evidence of repeated failures of these theories (as in the Global Financial Crisis), we continue to have blind faith that the West is powerful and wise, and so far above us, that we do not have the standing to criticize them.

So how can we create change by teaching micro-economics, known to be a dull and dry subject full of strange and complex formulas and deep and difficult mathematics, with no relations to the real world, or to human beings? FIRST we must go to a higher level of thinking. Just like META-Physics means thinking about the nature of physical theories, this course is about META-Economics, where we look at the nature of economic theories as an outsider. The standard course teaches students the economics is the UNIQUE truth about the world, and you must learn it and believe in it. INSTEAD, we will teach how neoclassical economics is just one very limited way of thinking about economics, and there are many other alternative systems and theories, which are far more successful at understanding the world. How economic theory works, who it helps and hurts, and how it continues to be taught despite its manifest failures on many fronts – this will be the object of our investigation in this course.

A goal of this course is to explain that the Simplest Meta-theory is another LIE which we have been taught to believe in economics courses. This Simple Meta-Theory holds that Economic Theory is TRUE. We learn it because it gives us knowledge about the real world around us. By basing policies on this economic theory, we can achieve good economic outcomes.

There is a huge amount of evidence that modern economic theory is false. Conventional Economic Theory should be called ET1% (The Economic Theory of the Top 1%).  The theory is developed for the SOLE reason of protecting the interest of the 1% AGAINST the interests of the bottom 90%. The middle 9% face a CRUEL CHOICE: They can betray their own class, and join the top 1% as second level managers. In return for joining the exploiters, they get priviliges and benefits, perks and salaries, and some illusion that they are part of the ruling class. But they have to sell their consciences. ALTERNATIVELY, they can stand up for justice and starve.

Next Lecture: AM02: Supply and Demand Models

Homepage for this course: Advanced Micro [Home on Google Website]

Orientalism

[shortlink: bit.do/azori] Introduction: The powerful and extremely influential book of Edward Said studies the impact that European conquest of the globe had on the mindset of the Europeans. It argues that all Western literature is tinged with the superiority complex produced by this conquest. Especially, “Orientalism”, or the study of Eastern societies by Western scholars, is deeply biased by assumptions of superiority, such as the assumption that only Europeans are equipped with the capacity for rational thought, while Easterners have crooked minds. The essay below provides a very brief summary of Edward Said’s book Orientalism. What is extremely important, and remains to be done, is to study the inferiority complex produced in the East at the same time. The Western education that we all receive is founded on assumptions of Western superiority, and we all unconsciously absorb this poisonous message. This is what leads our students and intellectuals feel that they are so far behind that they must first learn to imitate the West, and then only would it be possible for them to be creative and original and contribute positively to ongoing intellectual discourse. This discouraged and defeated attitude encourages copying Western ideas without thinking and is extremely harmful.

Published in The Express Tribune, September 18th, 2016: On  Sep 19,2016: WEA Pedagogy Blog & LinkedIn

Discussing “Orientalism” (ET title)

Orientalism by Edward Said launched a revolution when it first came out in 1978. He succeeded in discrediting an entire field of study; so much so that scholars no longer call themselves “orientalists”. His book has been enormously influential, with ramifications in many established disciplines, including literary studies, history, anthropology, sociology, area studies, and comparative religion. The thesis of the book is complex and subtle, and we will only attempt to sketch a crude outline in this brief essay.  

Said starts by noting the enormous political power of the West: “… in 1800 Western powers … held approximately 35 percent of the earth’s surface, and that by 1874 the proportion was 67 percent, a rate of increase of 83,000 square miles per year. By 1914, the annual rate had risen to an astonishing 240,000 square miles [per year], and Europe held a grand total of roughly 85 percent of the earth as colonies, protectorates, dependencies, dominions, and commonwealths. No other associated set of colonies in history was as large, none so totally dominated, none so unequal in power to the Western metropolis.”

He goes on to state his startling thesis that all knowledge produced about the world dominated by the West is deeply influenced by the gross political fact of conquest.Orientalism is a political vision of reality which promotes the difference between the familiar (Europe, West, “us”) and the strange (the Orient, the East, “them”). Edward Said refers to the awareness of Joseph Conrad that “The conquest of the earth, which mostly means the taking it away from those who have a different complexion or slightly flatter noses than ourselves, is not a pretty thing …”  This project is differentiated from the conquests, looting, rapine, pillage and theft of countless savage hordes throughout history only by an idea. This Noble Idea of the White Man’s burden glorified the “savage wars of peace,” carried out for the benefit of the sullen and ungrateful natives, to force civilization down their unwilling throats.

Edward Said analyzes the structure of knowledge about the East, Orientalism, as produced in Western academia, literature, arts, and other domains. He shows that all realms of knowledge of East reflect and re-inforce the themes European superiority and Oriental inferiority, woven together in a rich, complex and colorful tapestry. Whereas all good qualities are attributed to the Europeans, the opposite qualities are given to the “Other”: The Oriental is ruthless, despotic and cruel in positions of power, and sly, cunning, devious, and completely untrustworthy in positions of subservience. These themes figure prominently in “governance of subject races,” a subject of central importance to the imperialist powers. This knowledge was imparted to colonial administrators whose high-handed statements about the need to impart the religion of love, self-sacrifice, and to protect oriental women from oppression, were vastly in conflict with the practical imperatives of putting the entire population and natural resources to work to generate colonial revenues.

Edward Said asks how popular Orientalist generalizations like ‘their minds are as crooked as their streets’ and the attribution of ‘logic and reasoning’ as unique to Europeans, but absent from ‘Orientals’ could possibly be true. He shows that these myths were manufactured and perpetuated due to the political power of the Europeans. Sir John Stuart Mill exempted the Indians from his passionate call for liberty and equality for all, on the convenient pretext that all Indians are children, and require the despotic rule of the English. Orientalism analyzes the structure of the European discourse about the Orient, and shows that it ties in perfectly to the demands of imperial power, and bears no relation to the reality and the complexity of the lives of millions of subjects. The subject races are powerless to speak for themselves, and must put up with, and even come to believe, all that is said about them by the master races.

Is this beating a dead horse? In the 21st century, surely we have moved past these ancient myths of white superiority. The enormously racist statements of Trump, and the rising fortunes of racist and xenophobic parties in Europe, build upon this tradition of Orientalist knowledge. Millions killed in Iraq war, carpet bombing of Libya, and murder of thousands of civilians by drones, receives only favorable mentions in the world press, as a necessary part of the civilizing mission of the West. However, the killing of a few members of the master races receives global headlines, and is the basis for political policy, mass agitation, and wars to “shock and awe” entire nations into subjugation and submission.

In the foreword to the 2003 edition of Orientalism, Edward Said evaluates his work in retrospect. He writes that generalized labels like “Americans”, “The West”, “Islam” etc. have been extremely effective in mobilizing people for mass murders and wars. Critical thought, and reflection on our shared human experience, is required to counteract the effects of propaganda, which turns human beings into objects of hate. Rather than the manufactured clash of civilizations, we need to concentrate on the slow working together of cultures that overlap, borrow from each other, and live together in far more interesting ways than permitted by the dictates of power. It is a message of cautious hope, and a call for action, tempered by the dark knowledge of “the incredible strength of the opposition to it that comes from the Rumsfelds, Bin Ladens, Sharons and Bushes of this world.”

How to Inspire and Motivate Students

[shortlink: bit.do/azhims] — Lecture for Teachers by Dr. Asad Zaman on 24th Jan 2017 at PIDE, Islamabad. This lecture is for teachers; See “The Ways of the Eagles” for a lecture directly addressed to students, to motivate and inspire them, A detailed 3300 word summary of the lecture in English is given below. The video-taped one hour lecture in URDU on YouTube is also linked below. Central Listing on AZ Articles: Video/Talks

Lecture for TEACHERS on how to inspire and motivate students

Mesmerized by the spell of Western expertise, we are trapped by the illusion that they are the experts in every field, and the best we can do is to be second-rate followers. In fact, the educational methods in use in the West are extremely bad, and it is possible for us to make dramatic improvements in substance and style of teaching. By increasing the efficiency of our educational methods, we can change the world. Imagine producing world class experts of Nobel Laureate calibre at PIDE!

Can it be done? Can we create world-class experts, despite meagre resources and students with weak background and preparation, in Pakistan?  YES: It can be done.

What is needed is INSPIRATIONAL TEACHING. Every student is precious, and has within him/her all the genius of Al-Ghazali, Ibn-ul-Haytham, Ibne Sina, al Farabi, Ibn-e-Khaldun and others. If we can light the fire of the thirst for knowledge in their hearts, they can do the rest – we only need to create motivation and inspiration. So the question of primary importance is: How can we become inspiring teachers?

Since I am addressing teachers here, my first task is to explain what they (the teachers) will gain by improving their teaching? Some of the answers to this very important question are:

  • I will acquire mastery, expertise and depth of knowledge! I will be able to transmit this knowledge to students.
  • This knowledge has the potential to change my life, and to change the life of my students. Nothing is more precious than the opportunity given to me in form of time of students eager to learn. Nothing is more deeply satisfying than utilizing this opportunity to transmit the treasure of knowledge, the most valuable gift in the collective heritage of mankind.

Continue reading

Three Generation of Islamic Economics

The terminology of the three generation of Islamic Economists was first introduced in the  Forward  to the Special Issue of the International Journal of Pluralism and Economics Education (IJPEE) on The Challenge of Islamic Economics. VOl 6, No. 4, 2015, p313-323 Co-Edited by Asad Zaman & Jack Reardon. This brief introduction was expanded upon in my paper on Reviving the Promise of Islamic Economics. which was presented at the 11th ICIEF in Malaysia in 2016, and subsequently published in the IIUM journal. This post describes and explains these terms, and their historical context.

The first generation of Islamic Economists accompanied liberation movements in Islamic societies in the wake of the World War II, which weakened the European hold of power over the globe. The first generation (1950-75) saw the Islamic system as a radical and revolutionary alternative to both Capitalism and Socialism, which promised equity and justice. For many reasons, the dreams and visions of the first generation could not be implemented in the liberated colonies, which chose to continue colonial and capitalistic economic systems, rather than create a revolution based on Islamic ideals. The second generation (75-2005) realized that no Islamic revolution was coming and sought to change and modify existing capitalist systems to make them conform to Islam. This generation was forced to study capitalist economics, in order to modify it, and was FOOLED by the claims of neoclassical economics to be objective, scientific and factual. Once the second generation ACCEPTED these claims, it took mainstream ideas as being on par with the laws of gravity: indisputable. As a result, Islamic Economics became a minor branch of mainstream neoclassicals, adopting nearly all of its frameworks, methodologies, and ways of thinking about the world. This was a MAJOR MISTAKE.

Neoclassical economics is a detailed working out of the religion of worship of the Nafs, which is explicitly prohibited in the Quran. It starts with the premise that ALL human beings have (or should have) as purpose of life the maximization of utility of consumption — that is, pleasure derived from the life of this world. All human action is rational if and only if it is directed towards this purpose.  All the mathematics and analytics so fondly developed in neoclassical is based on this premise which is directly in conflict with Islam. For three fundamental flaws in the formulation of modern social sciences in the West, see my talk on Economics for the 21st Century, which explains how Islamic teaching, and only Islamic teachings, can help us overcome these flaws to create a radical and revolutionary approach to a new type of economics so desperately needed today. I have already constructed several courses which take an Islamic approach to teaching conventional subjects like statistics, micro and macro, and I have recorded lectures and put course and reference materials on openly accessible websites.

The distinguishing feature of the third generation, as I see it, is in the REJECTION of the knowledge claims of neoclassical economics to be a positive science. Third generation is defined by the idea that EVEN TODAY, the Quran offers us far better guidance about managing our economic affairs than a Ph.D. from Harvard in Economics would do. In contrast, the second generation rejects this idea, and believe that “reason” (that is, Ph.D. from Harvard) is on par with “revelation”. This general and widely accepted view among muslims — the parity between certainty and confidence we can place in Western systems of knowledge and the WAHY or revealed knowledge — is what I have called the greatest  problem facing the Ummah today — The Second Crisis of Knowledge Facing the Islamic Civilization.  The DEFINING characteristic of the second generation is that when they see a conflict between Samuelson and the Quran, then they re-interpret the Quran to make it conform to Samuelson. As opposed to this the DEFINING characteristic of the third generation is to REJECT Samuelson and accept the Quran.
See my paper on “Islam Versus Economics” for many examples of second generation efforts to create harmony between neoclassical economics and the opposite concepts in Islamic economics. For example, the first and third generation rejected the idea of scarcity as being in conflict with the frequently mentioned bounty of Allah, but the second generation accepted it. Similarly, the second generation accepted the idea of utility maximization and sought to find Islamic support for it, while the first and third generations rejected this idea. Today, Islamic ideals based on generosity and cooperation offer us a radical alternative to the tried and failed ideas of selfishness and competition of capitalist economics. It is unfortunate that most Muslims have been blinded by the glare of Western wisdom and neglect their own precious heritage, which offers us solutions not available in Western books.
These are my views, and Allah T’aala knows best