Q10:58 Say: “In this bounty of God and in His grace (that is, the Quran), then, let them rejoice: it is better than all that they may amass!”
Today, our ways of thinking are shaped by European thought. To recognize this, we need to learn how European thought evolved through history. For this purpose, Polanyi is very important
Polanyi offers a deep historical study of how European societies based on traditional values of cooperation and social responsibility were tansformed into modern secular societies. In Polanyi’s terminology, social relations became embedded within the market, creating a market society driven by the imperative of commercialization, which makes money the measure of all things, including human lives. This transformation has affected all dimensions of human existence – politics, economics, society and most importantly, our ways of thinking about these areas. In particular, Modern economic theory is a product of historical forces, and provides an intellectual framework for glorifying the market as the best way of organizing our economic affairs.
I believe that understanding Polanyi is of great importance in understanding the conflict between the values and intellectual frameworks of market societies and traditional society (and also Islamic ideal societies). Understanding how the great transformation took place also provides some clues as to…
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Excerpt from detailed summary of first lecture of my course on: Advanced Microeconomics I: An Islamic Approach
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 theories can be true even if they make false assumptions (like “rational” behavior for human beings). 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.
Dr. Mabid Al-Jarhi proposed a syllabus for Islamic Economics, based on a mixture of Western economic theories and some Islamic elements. In this note, I will discuss an alternative approach, which recognizes Islamic Economics as a polar opposite of Capitalist Economics, rather then a branch of it. IE is best for public welfare, while CE promotes inequality and favors the rich and powerful. This proposal for an alternative syllabus sketches some initial foundational concepts for IE. I have developed these in much greater detail in courses that I have taught based on these ideas. See for example, Advanced Microeconomics: An Islamic Approach. [shortlink 4 this post: bit.do/azies
We must begin by recognizing that the fundamental economic problem in Islam is radically different from the one taken as central by Western Economists. According to Samuelson and Nordhaus, the economist must strive to fulfill all wants – whether genuine or artificial. Note that this task is impossible, since wants keep increasing as you fulfill them, so the problem of scarcity can never be resolved. In contrast, Islam forbids us from fulfilling idle desires (=artificial wants), and ask us to urge the feeding of the poor. Since basic needs are satiable, scarcity is not a problem, and the central problem becomes ensuring re-distribution from those with excess to those who are in need. Focusing on basic needs leads to an entirely different economic theory, as I have discussed in my paper on First Fundamental Economic Problem: Feeding the Hungry.
There is a lot of controversy on this question. The majority position among Muslim economists is that the message of Islam is universal, and teachings of the Quran applicable to all human beings. Our discipline of Islamic economics should also be universal.
After considerable thought, I have come to the opposite conclusion. I believe that at the present, we should limit our intended audience to Muslims only, and target a Muslim audience for product development both on the theoretical and the practical front. It is only at a later stage that efforts to engage with the West may prove useful. I would like to record the reasons for this view.
This continues a sequence of posts explaining how conventional economics is actually the economic theory of the top 1%: ET1%: Blindfolds created by Economic Theories. Eight central concepts of economic theory are shown to be deceptive – they have an appearance of objectivity, fairness, and equity, but actually conceal a strong bias in the favor of the wealthy. The previous post was the “Illusion of Scarcity.”
We call the concept of “Pareto Efficiency” a swindle because it represents the normative principle that property rights of the wealthy take precedence over the right to basic needs of the poor. However, it is disguised to have an appearance of scientific objectivity, while the opposite normative preference, which most people have, is said to depend on subjective and unreliable value judgments.
Dr. Mabid Al Jarhi proposed a new syllabus for Islamic Economics, and circulated it for comments and discussion. This generated a very lively discussion. This post (4/19/18) post explains why an Islamic Syllabus should be based on Islamic Sources, not on Samuelson. See also later posts in this discussion: “Another Syllabus for IE“, “A First Lecture for Islamic Micro“, and “Spiritual Obstacle to Genuine IE“. My own Lectures on Islamic Economics illustrate the concepts discussed in these emails.
The difficulty that I have with the approach of Dr. Mabid Al-Jarhi is that there is no answer to the question posed by Dr. Mahmoud El-Gamal: why do we need to use the word “Islamic”? The economics being done is purely from Western sources, whether orthodox or heterodox, and the emphasis on math and analytics is a purely Western emphasis, which has no contact with Islamic teachings. Some Islamic topics like Fiqh and others are to be tacked on as an almost superfluous and un-necessary adjuncts – exactly as Cliff Cobb recognizes in his email: “you have indicated a desire to develop an endogenously developed Islamic economics, one that is not simply a response to or adjunct of neoclassical thought.” Unless we can put Islam at front and center, we cannot call it “Islamic Economics”. Here is how I propose to do so, in my Third Generation Islamic Economics paper.
We start by considering the diversity of human purpose – Inna Sa’yakum la Shatta. Human behavior is driven by the desire to achieve goals (which are diverse) and to understand it, we need to understand human purpose. Neoclassical economists believe that all rational humans have only one purpose – maximizing the pleasure they obtain from consumption. This is obviously wrong, and so using Islamic ideas would be an obvious improvement. In my short note on “A Methodology for Islamic Economics”, I spell out how we must found this on three elements – the positive or descriptive, the normative or ideal, and the transformative, the method to move from the current reality towards the ideal. The third element, creating change, was obviously part of the mission of the Prophet Mohammad SAW. Emphasizing these three elements would distinguish Islamic Economics from any of the currently available approaches, whether orthodox or heterodox, and, being firmly grounded in Islamic traditions, would justify the label “Islamic”.
In many papers, I have spelled out how Islam is diametrically opposed to Economics; for example, see “Islam Versus Economics”. The second generation of Islamic Economists have spent more than three decades overlooking the conflicts and striving to harmonize conventional economics with Islamic teachings, to the extent of even accepting utility maximization as a valid principle. A genuine Islamic economics can be built only if we reject “TheIllusion of Scarcity” as a foundational principle of economics. Instead, the first priority of an Islamic economic system would be to provide for the basic needs for all members of the society, and ensure access to equal opportunities for education for all. Making these the CENTRAL problems of economics would lead to a radically different kind of economics, which would justify a distinct and distinguishing name like “Islamic Economics”.
To summarize — if we wish to create an “ISLAMIC ECONOMICS” then the FOUNDATIONS for the discipline must come from Quran and Hadeeth. Current versions of second generation Islamic Economics have foundations in Samuelson, and trimmings from Islamic ideas — this approach is not acceptable. I think Dr Mabid Al-Jarhy’s proposed syllabus also falls into this category. How we can create a discipline which is founded on Islamic teachings is spelled out in my papers on Re-Defining Islamic Economics, and in Reviving the Promise of Islamic Economics. Modern Economic theory is DEEPLY FLAWED. If we have the COURAGE to do so, we can launch a revolution. Just as Islamic teachings created a revolution 1400 years ago, they have exactly the same potential today. However, today unfortunately, islam has become a stranger, and the Ummah is crawling into lizard-holes after the Christians and Jews.
PS: I have taken the liberty of adding a few names whom I thought would be interested in this discussion. Furthermore, the issues under discussion are of universal interest, wherever Islamic Economics is being taught. So I have copied the first twenty emails into a webpage linked below, and hope to update it later, so that a record is available for use by others. The link to the history of this email conversation is as follows: