Download ECONOMICS AND ISLAMIC ECONOMICS

ECONOMICS AND
ISLAMIC ECONOMICS
AUSAF AHMAD
Presentation on May 27th 2007
At
Imaarat Shariah, Patna, Bihar
Dominance of Economic Issues
 Dominance
of economic issues in
social discussions.
 Economics has become the
intellectual religion of the day.
 Lack of economic literacy
 Economic education
CLASSIFICATION OF KNOWLEDGE
KNOWLEDGE
Human
Knowledge
Divine
Knowlege
Arts
Sciences
Natural
Sciences
Social
Sciences
NATURAL SCIENCES
MATHEMATICS
ASTRONOMY
NATURAL SCIENCES
PHYSICS
Chemistry
Biology
SOCIAL SCIENCES
ECONOMICS
SOCIAL
SCIENCES
SOCILOGY
POLITICS
ANTHROPOLYGY
HISTORY
PSYCHOLOGY
DIFFERENT APPROACHES TO
ECONOMICS

Classical approach: Smith, Ricardo, J.B. Say
– Economics is the Science of Wealth.
 Critique of Classical Approach: Marx and Carlyle
 “Dismal Science” and “Bread and Butter Science”

Neo Classical Approach:
— Economics studies human welfare

Modern Approach:
— Economics studies how unlimited wants could be
fulfilled with limited resources. It is a science of
choice.
Economic goods and Free goods
 Distinction
between
economic goods and Free
goods.
 Scarcity as a fact of economic
life
 There is nothing like a Free
lunch.
Economy and Economic
organization
Meaning of Economy
 An economy is a organization of human
beings through which they carry out
certain basic economic activities such as
production, exchange, distribution and
consumption to fulfil their needs.
 Basic Functions of an Economy

BASIC FUNCTIONS OF AN
ECONOMY
WHAT TO PRODUCE? [issue of Allocation
of Resources ]
 HOW TO PRODUCE [ issue of choice of
techniques ]
 FOR WHOM TO PRODUCE [ issue of
Distribution of the produce

PRODUCTION POSSIBILITY CURVE
Guns in
thousands
Substitution between Guns and Butter
YC
Y3
Y2
Y1
XC
x1
x2
x3
Butter in thousand kg
DIFFERENT VIEWS OF ECONOMY

CONSUMPTION UNITS
households
Individuals
Economy
DIFFERENT VIEWS OF ECONOMY

PRODUCTION UNITS
f
Firms
industries
Sectors
Sectors
Economy
DIFFERENT VIEWS OF ECONOMY

EXCHANGE UNITS
Markets
Economy
METHODS OF ECONOMIC INQUIRY
Theoretical Methods
 Empirical Methods
 Both Methods are used in Economics
 No method is superior or inferior to other.
 Each method has its own limitation.
 To judge an economic data (result,
principle or theory) one must consider
how it has been arrived at.

THEORETICAL AND EMPIRICAL
METHODS
Experimental
Design
Real World
Experimental
Abstraction
Logical Model
Theoretical
Abstraction
Logical
Reasoning
Experiment
Statistical
Interpretation
Result of Experiment
Conclusions
about the
Real World.
Theoretical
Interpretatio
n
Logical
Conclusion
Deductive and Inductive logic

Deductive logic.
– Major and Minor Premises
– Conclusion is correct if major premise is
correct. For example:
All human beings are mortal.
John is a human being.
John is mortal.
Necessarily True
EMERGENCE OF ISLAMIC
ECONOMICS
Economics is not a very old science. Islamic
economics is even newer.
 The emergence of Islamic economic is the result
of dissatisfaction with the value premises of
Economic theory.
 Economic theory treats man as human
economicus, motivated by only self interest
which is supreme to every thing else.
 Economics divorced economic behavior from
Ethical behavior.

Deductive and Inductive logic

Incorrect Premises lead to incorrect
conclusions:
All Men are Stupid
John is a man
John is stupid.
Not necessarily true
Deductive and Inductive logic

Inductive Logic:
John is stupid
Tom is stupid
Jack is stupid
John, Tom and jack are humans
Therefore, all humans are stupid.
Not Necessarily True
Based on the Law of Uniformity of Nature,
which is itself unproved.
MICRO AND MACRO ECONOMICS
Micro economics is the study of
functioning of one unit of the economy
i.e. an individual, a household, a market
etc.
 Macro economics is the study of
functioning of full economy, different units
interacting with each other.
 It is not correct to say that one is more
important or more correct than the other.

ISLAMIC CRITIQUE OF MODERN
ECONOMICS
Islam does not approve of value premises of
modern economics.
 Modern economics assumes and treats man as
homo-economicus, motivated only by self
interest.
 The economy is perceived to be driven only by
Profit motive.
 Modern economy gives more weight to efficiency
in comparison to equity and justice.

EMERGENCE OF ISLAMIC
ECONOMICS
Economics is not a very old science.
Islamic economics is even younger.
 The contributions of Muslim thinkers and
philosophers have usually been neglected
in the history of economics.
 Attention to Islamic economic system was
diverted from Islamic banking and
financial system.

Rudiments of Islamic Economic
System

SYSTEM OF OWNERSHIP:
– Private ownership of property
– Public ownership of property
– Voluntary ownership of property

PRICE MECHANISM:
– Usually markets would be free but could be
regulated, non market controls, Mohtasib

ROLE OF STATE
– Balanced role
INTRODUCTION TO ISLAMIC
ECONOMICS
ISLMIC BANKING AND FINANCE
 MONETARY POLICY
 FISCAL POLICY
 MICRO ECONOMICS
 MACRO ECONOMICS
 DEVELOPMENT ECONOMICS

EPILOGUE
THANK YOU
FOR
YOUR TIME AND
CONSIDERATION.