Download Chapter 4 – Consumption In Islam

ISLAMIC ECONOMICS
ECS10403
Topic 4
Consumption in Islam
LEARNING OUTCOMES
• In this topic students will know the following,
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The Islamic Framework for consumption.
Concept of Need in Islam.
Maslahah versus Utility.
The Rule for Allocation of Resources to the Needs.
Views of early Muslim thinkers on consumption.
Role of Muslim Economists.
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CONTENTS
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Principle of Consumption in Islam
The concept of wealth and success
The brotherhood concept in Islam
The hierarchy of needs of Muslims
Decision making process
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WHAT IS CONSUMPTION?
• In economic theory, people perform two
primary functions within the market. These
functions or roles are consumers and
producers.
• Consumption is perhaps the last and very
important stage.
• Consumption stands for expending of wealth
for satisfaction of human wants such as food,
housing, education, health, other personal or
family needs.
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THEORY OF
CONSUMER BEHAVIOUR
• Utility-maximization: from secular point of view the theory
of consumer behaviour uses the law of diminishing
marginal utility to explain how consumers allocate their
income. Consumer choice and the budget constraint.
• Consumers are assumed to be rational, i.e. they are trying
to maximize their utility with the budget they have.
• Consumers have clear-cut preferences for various goods
and services and can judge the utility they receive from
successive units of various purchases.
• The determinants of a consumer purchasing goods
include, tastes (or pattern of preferences); income (ability
to buy); and choice (willingness to buy).
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UTILITY THEORY OF
VALUE AND THE
INDIFFERENCE CURVE
• Indifference analysis reveals
optimal utility, and the marginal
rate of substitution, is where the
indifference curve is tangent with
the budget constraint curve.
• When P increase for product B
from $1.00 to $1.50, the
equilibrium between what a
customer prefers and what he can
afford shifts from X to X’,
decreasing the quantity of product
B demanded from 6 to 3 units.
• The demand curve is determined
from the $1:6 units, and $1.5:3
unit combinations.
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MUSLIM CONSUMER BEHAVIOUR
• In Islam, the consumer is aware of Islamic norms and his
behaviour is governed by them. The basic principles of
consumption laid down by Islam are:
1. consumption of lawful things
2. consumption of pure and clean things
3. moderation in consumption
• His choice is how much of the income is to be spend on
worldly needs and how much to spend in the way of
Allah (infaq fi sabil Allah)
• Muslims are motivated to spend in the way of Allah
(s.w.t.) though many Quranic verses and Hadith which
highlight the rewards in the hereafter.
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Consumption of lawful things
• The followers of Islam are required to spend
their earnings on Halal or permitted expenses
and refrain from spending on Haram or
prohibited things such as wine, narcotics,
prostitutes, gambling.
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UNLAWFUL things:
• Carrion (dead meat), blood, pigs and idols, intoxicants
and gambling, purchase or sale of stolen items.
• Narrated Jabir bin 'Abdullah: I heard Allah's Apostle, in
the year of the Conquest of Mecca, saying, "Allah and
His Apostle made illegal the trade of alcohol, dead
animals, pigs and idols." The people asked, "O Allah's
Apostle! What about the fat of dead animals, for it was
used for greasing the boats and the hides; and people
use it for lights?" He said, "No, it is illegal." Allah's
Apostle further said, "May Allah curse the Jews, for
Allah made the fat (of animals) illegal for them, yet they
melted the fat and sold it and ate its price." (Bukhari,
3:438)
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Consumption of pure and clean things
• Salman reported that the Messenger of Allah
said: “The blessing of food is washing of hands
before it and washing of hands after it”.
(Tirmizi)
• Abu Qatadah reported that the Messenger of
Allah said: “When one of you drinks, he should
not blow into the vessel”. (Bukhari)
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Moderation in consumption
• Moderation involves a middle path in terms of a
balanced consumption
• “Those who, when they spend, are not
extravagant and not niggardly, but hold a just
(balance) between those (extremes)”
(Al-Furqan, 25:67)
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THE HIERARCHY OF
MUSLIMS’ NEEDS
• “The economic problem revolves around mankind’s
needs, the means of their satisfaction and utilizing these
means” (An-Nabhani, 2002:47).
• Limited needs can be fulfilled, but not unlimited wants.
(Zaman, 2010:88).
• Islam recognizes that man has certain needs, some of
which are more important and others less important. The
Shariah emphasizes that one’s preference might not
coincide with one’s true utility function.
• Al-Dimashqi (The Guide to the Merits of Commerce, AlIsharah Ila Mahasin Al-Tijarah, 570H/1175) classified
needs (al-hajat) as essential (daruriyyah) and others
which are socially incidental (‘aradiyyah wad’iyyah).
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THE HIERARCHY OF
MUSLIMS’ NEEDS (Cont.)
• Abu Ishaq al-Shatibi (Maliki, d.790H/1388) described
five fundamentals of existence in this world: (1) life; (2)
property; (3) faith; (4) reason; (5) posterity, and goods
and services that promote these five elements are said
to have maslahah for humans and are therefore needs,
which can be classified into three groups:
• Daruriyyat (Necessitates)
• Hajiyyat (Conveniences)
• Tahsiniyyat (Refinements / Beautification).
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DHARURIYYAT
(NECESSITIES)
• Necessaries are those wants whose
satisfaction is absolutely essential as without
doing it, man cannot survive.
• For example: food, clothing and shelter.
• The Prophet saying:
“That is enough for you of this world if it
meets your hunger and covers your body and
along with these, you get some (house) to live
in..”
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Necessities are held to include,
• protection of al-Nafs, man’s physical existence,
the provision of things like food, clothing and
shelter;
• protection of Din, religion;
• protection of al-‘Aql, mind;
• protection of al-Nasl, progeny or pedigree;
• and al-Mal, property.
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HAJIYYAT
(CONVENIENCES)
• Conveniences include things which improve on the
quality of life and remove hardship and difficulties.
• A man’sectoral ordinary food, clothing and shelter are
bare necessaries for his survival, but good food, good
clothes and a good house are his comfort.
• Enjoyment of comforts is permissible in Islam.
• Qur’an has enjoined upon the people to wear good
clothes, take good food and drinks but be not
extravagant.
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TAHSINIYYAT
(REFINEMENTS / BEAUTIFICATION)
• Refinements, on the other hand, are needs that
are above necessities and those that relieve
hardship, since they add beauty and elegance to
life without transgressing the limits of moderation
as defined by the Shariah.
• e.g. quality Persian carpets, high quality furniture,
clothing etc…
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ALLOCATION OF RESOURCES
TO NEEDS IN ISLAM
• Resources should be first allocated to the essentials
or daruriyyat, and if any balance left over then to
hajiyyat, then to tahsiniyyat. This involves first level of
preference ordering akin to lexicographical ordering
which cannot be represented by convex indifference
curves that neo-classical economics assumes for
preference ordering (Khan, 1995:37): Islamic consumer
behaviour involves an Analytic Hierarchy Process (AHP).
• “And let not your hand be tied (like a miser) to your
neck, nor stretch it forth to its utmost reach (like a
spendthrift, extravagant), so that you become
blameworthy and in severe poverty.” (Al-Isra’, 17:29)
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DECISION MAKING PROCESS
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EFFICIENCY
• Islamic theory of of consumer behaviour considers 4 levels of
consumer choice.
• Secular economics restricts itself to the 2nd and to the 4th levels,
choosing to ignore the 1st and the 3rd level.
• In the 4th level in secular economics, choices between
substitutes are applied but only partially, without recourse to
maslahah -v- utility, or indeed praiseworthy or blameworthy.
• Therefore, the scope of consumer behaviour in Islamic
economics is much larger than in secular economics.
• The concept of secular efficiency is to maximize satisfaction
with available resources.
• Islamic efficiency is to maximize the fulfillment of needs with
available resources.
• Fulfilling needs is desirable, it is desirable that necessities are
met as a first priority; those that have more than this are required
to meet the necessities of those who do not.
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ISLAMIC -v- CONVENTIONAL CONSUMER
BEHAVIOUR IN THE MARKET PLACE
• Conventional concept of consumer behaviour rests on a
persons utility function, but Islamic consumer behaviour
rests on Allah’s pleasure in term of spending to help
others (alms).
• Conventional consumer behaviour focuses on
consumption for worldly needs only, but in Islam
consumer behaviour looks on both the worldly needs
and the hereafter.
• Consumer behaviour in the conventional system is free
to consume any product according to his desire or whim,
but in Islam it is bound by moderation and Islamic
morals and ethics.
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SPENDING IN THE WAY OF ALLAH
(infaq fi sabil Allah)
• “And those whose wealth is a recognized right. For
the (needy) who asks and the deprived.” (Al-Ma’arij,
70:24-25)
• Re-distribution of wealth in the form of sadaqah can
be compulsory such as zakat, kharaj, jizya, ‘ushur; but
it can also involve voluntary spending (infaq) that
includes waqf, takaful and qard al-hasan.
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AL-GHAZALI
• Consumption and consumer behaviour
• “The object of the wise is the vision of the Lord in the next world and the
only way to gain it is learning and action and there is no other way, but it
is not possible to stand constantly on them without a health body which
is also not possible without food and drink, such food and drink which
are absolutely necessary and which are taken according to prescribed
rules”
• Ihya, 2004, 2:1, Bk.11 Kitab Adab al-Akl (Book of the Manners Relating to Eating)
• “The sustenance of a number of the sahabah was no more than a sa’ of
wheat every week. When they ate dates they sufficed themselves with
one sa’ and a half. One sa’ of wheat is four mudds, so that each day
they ate about half a mudd, a third of the stomach. A greater quantity
was required in the case of dates because these contain pits which must
be discarded. Abd Dharr (r.a.) used to day, ‘every week my food
amounts to one sa’ of barley, in accordance with the usage of the
Apostle of Allah (s.a.w.s.), and, by God, I shall not eat more until I meet
him again!”
• Ihya, 2004, 3:87-87, Bk.23 Kitab Kasr al-Shahwatayn (Book of Breaking the Two Desires)
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MUSLIM ECONOMISTS
• The role of Muslim economists suggests that they must clarify
and develop consumer behaviour to determine the affect Islam
has on (1) propensity to consume/save; (2) sharing income with
others; (3) composition of the consumption basket; (4) inequality
of consumption in the community etc..
• They will need to integrate the theory of fiqh principles relating
to the theory of consumer behaviour and the theory of the firm.
• The views of early Muslim thinkers must be incorporated more
into Islamic economics in order to avoid replication of secular
economic concepts.
• Islamic economists must develop and analyze empirical data
concerning consumer and business related decisions in order to
compare them more effectively with analysis derived from
conventional economics.
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MUSLIM BROTHERHOOD
• Narrated Abu Huraira (r.a.), the Prophet (s.a.w.s.) said,
“Do not envy one another; do not inflate prices one
to another; do not hate one another; do not turn away
from one another; and do not undercut one another,
but be you, Oh servants of Allah, brothers. A Muslims is
the brother of a Muslim: he neither oppresses him nor
does he fail him, he neither oppresses him nor fails
him, he neither lies to him nor does he hold him in
contempt. Piety is right here - and he pointed to his
breast three times. It is evil enough for a man to hold
his brother Muslim in contempt. The whole of a Muslim
for another Muslim is inviolable: his blood, his property,
and his honour.”
Narrated by Muslim, hadith no.35 in An-Nawawi’s “Forty Hadith”.
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