Questioning ALL of Economic Theory?

In general, many people are shocked to learn that I recommend wholesale rejection of modern economics. Like Dr. Anas Zarqa, they advise me that Islam recommends moderation — we should carefully examine knowledge, and accept that which is good and reject that which is wrong.  Here is my response to his email to me to this effect:

Dr Anas Zarqa, Assalamo Alaikum

Here is a link to a post by David Ruccio, a leading heterodox economist, who argues that we need to question the ENTIRE EDIFICE of mainstream economics: (Utopia and Macroeconomics)

Recognizing how narrow the existing discourse has become means we need to question the entire edifice of mainstream macroeconomics, including its utopian promise of full employment and price stability.

Only then can we begin to recognize how bad things have gotten under both the successes and failures of mainstream macroeconomics and to imagine and invent a radically different set of economic institutions.

Many other mainstream, leading economists have said similar things, such as: (1) The entire profession went astray because it mistook the beauty of mathematics for truth; (2) Macroeconomists completely ignore conflicts between reality and their theories, so much so that we need to create a new word for this: I suggest POST-REAL economics. (3) Economists suffer from a Pretense-of-Knowledge syndrome — they pretend to know things about which they have no idea. (4) X-Gov FRB USA: Currently we do not have working theory of inflation — he examines more then seven existing theories, and show how the reality contradicts all of these theories. These (4) quotes are just an illustrative sample. Many books like Hill and Myatt, The Economics Anti-Textbook, or Steve Keen’s Debunking Economics: the Naked Emperor of Social Sciences, are FULL of chapters showing the failure of core propositions of economic theory. Are only Muslims forbidden from wholesale criticism of modern Economics or does this restriction apply to heterodox, Marxist, Institutional, and Word-Systems theorists as well?

 ISLAM OFFERS a radically different set of ideas and institutions which the whole world is currently looking for.  However Islamic economists have been unable to clearly explain and describe this alternative, because they have become trapped in the blind alleys of mainstream economics, and have been unable to recognize the stark contradictions between mainstream economic theory and Islamic teachings.
The Samuelson textbook states that economists must “try to fulfill all wants, whether they are genuine or contrived”. All conventional economists take the same position, saying that wants are EXOGENOUS, and a good economic system must try to full all desires backed by money — demand.
“Have you seen the one who takes as his god his own desire?” [Al-Qur’an 25:43] And “He followed his own desire. So his example is like that of a dog: if you chase him he pants, or if you leave him, he [still] pants.” [Al-Qur’an 7:176] And about the person who controlled the passion of his soul/self God says: “But as for he who feared the standing before his Lord and restrained the soul from [his] desire, then indeed, Paradise will be his refuge.” [Al-Qur’an79:40-41]
It seems to me that we have to CHOOSE between Samuelson and Quran. Either we should try to fulfill all desires, regardless of what their origin is, OR we should RESTRAIN ourselves from fulfilling idle desires, and also do Amr Bil Maaroof by encouraging others to do so. According to Quran, those who are SAVED from following their desires are the successful ones, whereas according to Samuelson, those who succeed in fulfilling their desires are the successful ones.
Another concept CENTRAL to Economics is directly opposed to Islamic teachings. According to Consumer Sovereignty principle, which is central to modern economics, all people know what is good for them, and when free to choose, they will automatically make the choices which maximizes their welfare. The idea of the free market economy depends on this principle — if we allow everyone complete freedom to make their own choices, they will automatically choose whatever is best for them. HOWEVER, according to the Quran (2:216: But perhaps you hate a thing and it is good for you; and perhaps you love a thing and it is bad for you. And Allah Knows, while you know not.” IF this is true then we must go for REGULATING the market — we cannot allow people to make freely choices which harm them and society. Many Muslim Economists have CONFUSED the dramatic difference between an UNREGULATED market (capitalism) and a REGULATED market (Islamic markets with HISBAH), and therefore considered the two to be almost the same.
The main reason for our confusions is the CONQUEST OF KNOWLEDGE. As Ibne Khaldun remarked, defeated nations try to imitate the victors in all ways. Three centuries of defeat on numerous battlefield between the West and East have created a defeated attitude and mentality among Muslims, which has led to mindless imitation of everything West has to offer, instead of a critical analysis. It was predicted that the Ummah will follow the Christians and Jews, even into the holes of lizards. Because our eyes have been dazzled by the apparent brilliance of Western knowledge, we are unable to see the defects in their ways of thinking. My post linked below shows how there are THREE major mistakes in the European intellectual traditions that have persisted for centuries, and it is highly unlikely that the West will be able to see and rectify these errors. Therefore, it is up to us Muslims  to create an “Economics for the 21st Century” by rejecting these errors, and replacing them with the right concepts which are readily available within the Islamic traditions.
These are my fallible opinions and Allah T’aala knows best. I am happy to listen to any advice or corrections regarding my thoughts as expressed above.
Asad Zaman
PS: For previous posts, and links to the entire discussion, see Another Syllabus for IE
This entry was posted in Critique of Conventional Economics, islamic economics by Asad Zaman. Bookmark the permalink.

About Asad Zaman

BS Math MIT (1974), Ph.D. Econ Stanford (1978)] has taught at leading universities like Columbia, U. Penn., Johns Hopkins and Cal. Tech. Currently he is Vice Chancellor of Pakistan Institute of Development Economics. His textbook Statistical Foundations of Econometric Techniques (Academic Press, NY, 1996) is widely used in advanced graduate courses. His research on Islamic economics is widely cited, and has been highly influential in shaping the field. His publications in top ranked journals like Annals of Statistics, Journal of Econometrics, Econometric Theory, Journal of Labor Economics, etc. have more than a thousand citations as per Google Scholar.

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