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What is Islamic Economics?
Professor Muhammad Anas Al -Zarqa
6 Ramadan 1428
18 September 2007
Q.1. What is Economics?
Ans.1.
It is the social science that studies the
production, distribution and consumption of goods and
services.
Q.2 What is an Economic System?
Ans.2.
It is the set of goals rules and institutions that
society prefers to follow in its economic life.
Economic systems are the major repository of the
“values” and ideals that society wants to live up to
in its Economic life.
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Q 3. What are the main components of Economics?
For this lecture it is useful to divide Economics as a
field of study into three components:
(A) Economic analysis: the cause – effect and
descriptive economic statements. This is the “What
is” or “positive” element in Economics.
(B) Comparative economic systems. This is the
“normative” component, i.e. what ought to be, the
do’s and dont’s, haraam and wajib in economic life.
(C) Economic Policies: How to move from here to
there. How to change present Economic reality to
make it closer to our ideals (our Economics system
goals). Economic policy always involves both
“analysis” and “system values”.
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Q.4 What is Islamic Economics?
Ans.4
There are two competing definitions:
First definition: Islamic Economics is the science
that studies the economic life of a society that is
guided by Islamic Shari’ah. Thus economic life of
non-Muslim societies falls outside the scope of this
definition.
Second
definition:
Islamic
Economics
is
(economics guided by Islamic Shari’ah). Its scope
is wider as it includes all societies both Muslim and
non-Muslim.
It studies economic behavior,
institutions and policies even when not conforming
to Shari’ah. Islamic Economics is (Economics in
Islamic context).
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4.1 Which definition is better?
I definitely favor the second more comprehensive
definition, for several reasons:
(a) It is consistent with the universality of Islam, (b)
it is consistent with the Quranic injunction to draw
lessons (ibrah) from other societies experiences.
How can you draw lessons from something you
don’t study?
4.2 Some implications of definition 2:
 You must learn conventional economics in all
its varieties (i.e. capitalist, socialist etc.) and be
able to put it in Islamic context.
 We need to clarify the meaning of “putting
Economics in Islamic context”.
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5.
How to put Economics in Islamic context?
Your chosen Economic system gives you (a) goals,
(b) rules, and (c) preferred institutions.
Economic
analysis tells you how to get closer to your goals, while
observing the rules with the help of (and without
damaging) the preferred institutions. You put economics
in Islamic context when you look at each economics
idea from the point of view of Islamic Economic system
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6.
What are Islamic Economic Goals
(a) Minimum level of living for each person to be
guaranteed.
(b) Just distribution of income and wealth
(c) ……………………..
7.
Some Islamic Economic institutions
 Well functioning competitive markets
 The family as a major socio-economic building
block
 The state upholding justice, resolving disputes,
setting detailed rules and policies to achieve
system goals.
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8.
Economic Analysis in the service of Shari’ah
 Is it permissible to borrow from “Western”
Economics?
 Is it useful?
 Is it Western?
 Examples of conventional Economic analysis
useful in understanding some Fiqh muamalat:
(A)
Agency theory in contracts. Why costs
of monitoring an agent behavior under
different contracts explain the conditions
which one contract is more useful than
another. E.g. mudarabah financing Vs.
murabaha
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(B)
Functional Vs. personal distribution of
income
(C)
Scope
.
and
enforcing
Shari’ah
prohibition of monopoly and of price
fixing
 Example of conventional Economic
analysis
corrected
by
Islamic
economists:
Is interest essential for an efficient
economy?
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9.
Conventional (non-Islamic) Economic Schools of
Thought
 Diversity among schools
 Neoclassical
 Keynesian and Neo-Keynesian
 Institutional:
in
market
and
monetary
Economics
10. Methodological Issues in Islamic Economics
10.1
Drawing the borders between fiqh and Islamic
Economics. Place of maqasid al-Shari’ah and fiqh
muamalaat.
10.2 Handling diversity in Fiqh rulings
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