Definiton of Islamic Economics

It is very difficult to define economics because it has to maintain its linkage with ground realities, more so in an Islamic dispensation. For, economic activity is a part of social dynamism. Thus, with multifarious social change the scope of economics must keeps on changing rather expanding like the boundaries of a fast growing metropolis. Still, for proper understanding of the subject, it becomes necessary to define it as precisely as possible. A generally acceptable consensual definition of Islamic economics has not yet emerged even after more than six decades of its formal/informal existence (Iqbal, Syed Ali & Muljawan 2007, p.4). Social dynamism apart, several other reasons have impeded the progress in the matter. First, the task of formalizing Islamic economics was initially taken up by the religious scholars. They worked hard with devotion, earnestness and humility. They successfully raised the edifice of the Islamic economics, expanded educational institutions and courses in the area, brought out journals and attracted professionals from the mainstream to enrich and give the subject a modern look and acceptability. Great contribution it all was and earned all praise it deserved. New entrant to the discipline were sought and encouraged albeit there was a discernible preference for those linked to the Islamic revivalist movements in matters of recognition and reward. A sort of school of thought seemed to have developed in Jeddah (Hasan 2005, 12-13) having common position on the approach content and thrust of Islamic economic ideas. With occasional departures, concepts like scarcity of resources, pursuit of self-interest, and maximizing behavior on the part of economic agents and what followed in their wake was mostly thought extrinsic to Islamic economics; nay they were acclaimed to be the defining departures from the secular mainstream economics. This created a lot of difficulty, confusion and inconsistency in shaping the subject – its definition, nature and scope14. There is no commonly agreed definition of Islamic economics; there is rather a welter of them characterized with ambiguity, confusion and illogic. The historical ‘pull back’ on the one hand and resistance to it on the other hand divided the Islamic economists into two broad strains – regressive and forward looking. The regressive insist on a puritan all-or-nothing approach to develop Islamic economics. They reject the mainstream economics lock stock and barrel; to them, it contains nothing worth Islamic approval. They are ivory tower thinkers and offer little that is operable in the current times, even in Muslim countries. In contrast, there are those who argue that Islam never divided knowledge into Islamic and non-Islamic. It takes the available stock of knowledge, advocates for using Islamic filters to accept that passes through and reject what does not even after modification in the light of Shari’ah norms. It is this sort of ‘step by step approach’ that is gaining ground in the more recent writings in Islamic economics. Then there are those who are seen lurching between these two more definitive positions; not a few have preferred to revise their earlier postulates. There is now increasing realization that mainstream economics contains much in terms of argumentation, analytical tool and modes of presentation for absorption with advantage. Importantly, the denial of resource scarcity has almost vanished, pursuit of self-interest conditioned by the Islamic ethical norms is accommodated and maximizing behavior is not rejected out of hand. Despite this softening of attitude, the majority of scholars continue to have strong proclivity to denounce any semblance of a proposal of defining Islamic economics that has the slightest affinity with the mainstream as touching the untouchable. This must be resisted as no one, save the naïve, can deny the ‘unlimited wants-scarce resources’ reality of human existence being part of the divine scheme. The definition we present below is doubtless in the post-Marshall vein and yet its ramifications, we shall see, pull the two disciplines poles apart. “Islamic economics is the subject that studies human behavior in relation to multiplicity of wants and scarcity of resources with alternative uses so as to maximize falah that is the well-being both in the present world and in the hereafter” (Hasan 2015, 4). Islam nowhere denies unlimited character of human wants; a tradition rather says that if one is given a mountain of gold, one would ask for another. Allah in his mercy to mankind has created resources for his use in inexhaustible measure but what and how much from the store would be available to humans at a time and place depends on the state of their knowledge and effort. Unlimited wants relative to resource availability is the fountainhead of human progress and prosperity, concern and anxiety as well (Hasan 2014). The incorporation in the definition of the notion of ‘Falah’ to which the call to prayers invites the believers to come from the minarets ten times a day is epitome of what Islamic requires of mankind – using the material means to achieve solace in the hereafter. It is expressive of the prayer that believers address to God after each prayer: “Lord! give unto usin this world that which is best and in the hereafter that which is best, and save us from the torment of fire” The Qur’an (Al-Baqarah 201). In addition, the definition closes the gap between the mainstream and Islamic disciplines, yet keeping the two distinct because of world view differences. Some of the important concepts are in the revision process. Denials of resource scarcity relative to multiplicity of wants has almost vanished, pursuit of self-interest within ethical bonds is acceptable, above all maximizing behavior on the part of economic agents is entertained with conditions.


Nature and scope The nature of economics signifies the sort of subject it was - a positive science, or a normative science? The distinction symbolized the culture of mainstream economics since Lionel Robbins (1932). The distinction became common in economics textbooks15. Scope on the other hand, refers to the subject matter of economics that is the sort of areas it covers. Because the basic economic problems of people everywhere are quite similar consumption, production, exchange of goods and services as well as distribution of wealth remain the basic concerns of economics, including Islamic, both at the micro and macro levels. Financing and public economics problems including environmental issues cannot be ignored. Price theory would lie at the heart of all these discussions. The point of departure from mainstream would be the concept of efficiency in various fields. Efficiency would be hard nut to break. For example, price discrimination in monopoly is considered efficient in mainstream economics but Islamic ethics may consider it unjust. Similar could be the case of wage cuts to pull the economy out of depression. Cases can be multiplied. Following Adam Smith, mainstream economics was thought concerned with wealth and the factors that promote its growth in society until closing years of the twentieth century. But the social environ was still swayed with ethical and moral considerations. The focus on wealth made economics an unpopular dismal science. Marshall (1898) shifted the emphasis to achieving social well-being, wealth considered only a means to that end. Economics became both a positive and normative science with an art aspect as well. The position changed radically when in 1932 Lionel Robbins, a member of the Vienna Circle, posited a scarcity based view of economics making it neutral towards the ends. Positivism became its nature, empiricism its method. Its scope widened. Wherever scarcity could give rise to a cost benefit trade-off was seen an economic problem. Thus, economic analysis is applied today not only in popular spheres of life but even in crime, education, the family, health, law, politics, religion, social institutions, war, and science. The expanding domain of economics in the social science has been described as ‘economic imperialism’. The description shows the nature and scope of modern economics. This may all extends to Islamic economics but with its halal/haram restrictions. Islamic economics too is a scientific body of knowledge, in that it admits the use of reason and analogy to establish ‘cause and effect’ relationships. The Qur’an, in fact, does not shun rationality or positivism. It is not averse to the use of empirics either. The scripture contains many positivist statements about the natural phenomena and human character. However, based as it is on religion, Islamic economics has of necessity a dominant normative aspect; it cannot move beyond its moral confines. Since Islam prescribes a way of living in this world, it avoids idle theorizing. Principles of Islamic economics are essentially the principles of economic policy. In sum, the subject holds both positive and normative content. It also prescribes action programs to achieve Islamic ends as alluded to earlier16 . As one point of distinction, it is at times contended that mainstream economics is value neutral while Islamic economics is value based. This is not true. For, mainstream economics too is not free of value judgments. Values are implicit in its basic assumptions – freedom of enterprise, private ownership of property, market arbitration, competition, non-intervention and so on fall in the category. These assumptive values exist because of social approval and can also be changed or modified through social agreement. In Islamic economics values are God ordained; human beings can impart to them limited interpretive flexibility; they cannot abolish or replace them. Thus, both economic disciplines have values; the difference lies in their source.