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Islam and «Scientific» Economics

In the Pursuit of a New Paradigm

by Hasan Gürak (Author)
©2014 Monographs 199 Pages

Summary

In an Islamic society, it is ethics that dominates and determines all behavior, including economic behavior. The Holy Koran emerges as the main source of all economic behavior and practices which are subject to the commands of Allah as stated in the Koran. Since Islam is a universal religion, the Islamic economic paradigm with its «scientific» Islamic economic theories has to be comprehensive as well as perfect in the sense of fairness, ethical values and fruitfulness. A universal Islamic economic system ought to have universally applicable economic laws acceptable by both, the Muslim and the non-Muslim world – meaning that when the word Islamic is taken out of the equation; it should appeal to all societies and countries equally, regardless of their religious persuasion. The question now is; do Islamic economics offer such «scientific» economic theories? Surprisingly, there were no such theories at all. In fact, there was not even a theory of interest, the most frequently referred to subject in Islamic economics. This appeared to be a serious omission. The Holy sources may be more than sufficient for Muslims, but what about non-Muslims? Isn’t it justified to expect Islamic «scientific» economic models and theories that are applicable to or able to guide non-Muslims?

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the author
  • About the book
  • Preface
  • This eBook can be cited
  • Table of Contents
  • Introduction
  • On the State of Knowledge
  • On the “Creative” Mental Skills of Man
  • On the “New Knowledge” on Economics
  • The Content and the Method
  • Chapter-1 Revaluation of Islamic Economics-1 Developing Islamic Economic Theories
  • Introduction
  • Islamic Economic Theories in Retrospect
  • Islam and Economic Knowledge
  • Influence of Islamic Scholars on Economic Issues
  • The difference between Islamic economics and the “Others”
  • Islamic economics-reconsidered
  • Islamic Economics
  • The lack of a scientific dimension
  • The Verses of the Koran & the Hadith about “Alternative” Economics
  • Concluding Remarks
  • Chapter-2 Revaluation of Islamic Economics-2 Western Scientific Economic Theories Are They A Proper Source of Inspiration for Islamic Economics?.
  • Some Opinions on Islamic Economics
  • The Concept of Islamic economics
  • How Does One Proceed?
  • Some Features of the Mainstream Theory
  • The Nature of the Neoclassical Theories
  • Do Assumptions have to be “Utopian”?
  • The Historical Dimension
  • A Fictitious Case: The State of Equilibrium
  • Utility
  • Homo Economicus vs. Normal Man
  • What is the Attraction of the Neoclassical Theories?
  • A Brief Glance at the Past
  • “Normative” Neoclassical Theories
  • Positive Economics vs. Normative Economics
  • On scientific (!) mainstream economics
  • Chapter-3 Revaluation of Islamic Economics-3 Islam, Science and the “Absolute Truth”
  • Introduction
  • The Positive Sciences – Economics & “Absolute Truth”
  • “Natural” Sciences and the “Absolute Truth”
  • Social Sciences and the “Absolute truth”
  • The Islamic Faith and the “Absolute Truth”
  • Islamic Economics and the Notion of “Absolute Truth”
  • Chapter-4 An Islamic Value & Price Theory An alternative approach based on mental labor and technological change
  • Introduction
  • The Hypothesis
  • The analysis is “Islamic” because
  • Why Price Theory?
  • Towards a New Mindset
  • A Brief Historical Review
  • The Original Sources of Value: Nature and Laborer
  • The Labor-power
  • “Creative” Mental Labor and Value Generation91
  • Value Generation - A Simple Model
  • Different Qualities of Mental Labor
  • Value-Price Relation
  • Relative Prices
  • Relative Prices in the Service Sector
  • Commodity Sector Price Formation
  • Transformation of Values into Prices
  • A Case of “Barter-Exchange”
  • Price Formation in a Monetary Economy
  • Production with Multiple Inputs
  • A “Given” Product & a “given Production Method” & Profit
  • How Influential is Variations in Demand?
  • Technological- (Macro-) Productivity Growth & Profit
  • A “Given” product but “new” production method and price
  • “New” products, price & profit
  • Concluding Remarks
  • Chapter-5 On the Islamic Theory of Trade
  • Introduction
  • Developing a New Theory of Trade
  • On Western Trade Theories
  • Adapting Secular Theories
  • Developing an Islamic Trade Theory
  • Some Remarks On Global Trade
  • Global? or International?
  • Global Trade & Competition
  • Global Competition & FDIs
  • FDIs & Global Intra-Firm trade (IFT)
  • Global Trade & the Convergence of Wages & Prices
  • Concluding Remarks
  • Chapter-6 Islam & Interest From the perspective of an economist
  • Introduction
  • What is Interest (or Riba)?
  • Some Views about Interest
  • Interest as referred to in the Koran
  • Koranic Verses on Interest (According to their Date of Revelation)
  • Sunnahs and the Interest
  • Commodity Interest
  • Interest According to the “Islamic Encyclopaedia”
  • “Other” Views on Interest
  • Interest: Reconsidered
  • “Surplus”
  • 1- “Earned” Income
  • 2- “Unearned income”
  • Chapter-7 Interest, Surplus, Savings and Rent
  • Introduction
  • Income of the Financial Firms
  • The “Surplus” in the Return of a Loan
  • 1- Loans for “Production” and the “Surplus”
  • 2- Loans for “Consumption” and the “Surplus”
  • 3- Loans for “Basic Consumption” and the “Surplus”
  • 4- Loans Borrowed by the State and the “Surplus”
  • The “Surplus” on Saving Deposits of Individuals
  • Encouraging Productive Investment
  • “Hoarding” Money, Capital & Competition
  • Rent
  • Rent-Interest Dichotomy?
  • “Interest” vs. “Profit-sharing”
  • Final Remarks on Interest
  • Chapter-8 Concluding Remarks
  • General Perception
  • Final Remarks: Competence
  • Bibliography

← 12 | 13 → “Neither is religious faith an alternative to scientific knowledge, nor is scientific knowledge an alternative to religious faith.”

H. Gürak

Introduction

The main purpose of the three monotheistic religions based upon their ethical teachings is to provide guidelines for the individual and the community to keep them from committing sins and to regulate their behavior in accordance with their holy values in such a way that they will eventually achieve a better life in the hereafter. Islam, too, demands that its believers have faith in only one God (Allah) and live according to the tenets of Islam. In an Islamic society, it is ethics that dominates and determines all its behavior, including its ‘economic behavior’.

Every individual has certain rights as well as duties to fulfill as ordained by Islamic tenets. These individual rights and duties ought not to be neglected under any circumstances. For example, how an individual is expected to behave in his daily life, or what conditions have to be taken into consideration in trading activities, or which items are ‘Halal’, (permissible), or ‘Haram’, (prohibited), amongst other things, are in many cases predetermined and described in detail in Islam’s holy book, The Koran.

If the Koran does not express any instructions with regard to any societal event, then reference is made to a secondary source; the Sunnah, which is a compilation of the sayings and practices of the Prophet Muhammad. If it is the case that no ruling or explanation can be found in the Koran or in the Sunnah, a third source is invoked. These are the rulings, judgments or explanations of the Ulama. This is a body of religious judges who are experts on the Islamic body of law, the Sharia. The conclusions arrived at in this way are referred to as ‘Ijtihad’, which are new Islamic “man-made” rulings or explanations based on the consensus of opinion amongst these Islamic judges. It is no surprise that such man-made laws could display a wide range of opinions based on the specific sectarian beliefs of the judges.

← 13 | 14 → Another type of man-made law is called ‘Ijma’ which implies the consensus of ‘all’ Islamic judges on the “rightness” of a belief or practice, as distinct from the ‘Ijtihad’ which obviously displays a sectarian bias. According to a 15th century Turkish (Ottoman) religious leader Molla Hüsrev:

“The condition of ‘ijma’ is that the ‘mujtahideen’ living in the same century must unanimously agree… An ‘ijma’ bearing the necessary condition implies knowledge (science) and those who reject it shall be accused of blasphemy.” (Koca; 2008; 150).

After the period of the four Caliphs (Abu-Bakr, Omar, Usman and Ali), the Islamic scholars, or to be more specific, the Islamic judges have had a highly influential and authoritarian role in the lives of Muslims. For centuries they determined, to significant extent, the daily practices as well as any potential future developments. One of the main reasons for this was the need to expound the verses in Koran and the Sunnahs of the Prophet to people who were largely uneducated. Another reason was the need to guide the people in accordance with Islamic principles when there was no reference to a specific case in the Koran or the Sunnah. The latter reason is of significant importance because as mankind climbs the developmental ladder exposure to an ever increasing pool of global knowledge, many previously unknown problems arose which needed to be resolved in line with Islamic principles. Under such circumstances, the faithful Muslim’s primarily source of consultation has been the Islamic judges.

It would be unrealistic to assume that all the opinions, interpretations or rulings of the Islamic judges have been “perfect”, especially on economic matters. That is simply because; they frequently did not possess the required qualifications on these matters. In fact, even if they had the required qualifications, their interpretations, comments, and opinions would in all likelihood have been essentially different due to their subjective perception of matters not directly referred to in the Koran or Sunnahs.

On the State of Knowledge

Unfortunately the average level of qualifications of the labor force and the global competitive level of enterprises in the Islamic countries lags far behind contemporary standards in terms of their knowledge of the patenting of new ideas in the areas of technology and science. In the last four centuries, most of the scientific and technological advances have taken place in non-Islamic countries. It does not appear that this trend is likely to change in the near future. But once upon a time, the Islamic countries and their scholars were superior to their Western ← 14 | 15 → counterparts in science and technology. The Western Christian countries successfully transferred massive scientific and technological knowledge from Islamic countries and then developed this knowledge further. Thus, the scientific and technological development of the Western countries owes a significant debt to the scholars of Islam.

So, what prevented the Islamic countries and their scholars from further advancing the science and technology they possessed? Did they lose their mental skills and talents?

Of course they didn’t! The Islamic countries and their scholars did “not” lose their mental skills or talents. But they did not do, or could not do, what was necessary in order to further develop this knowledge due to the circumstances at the time. Or, at least, they weren’t as successful as the Western world in their efforts to further develop the existing science and technology.

The most significant and influential factor in this lack of development was the structure of the education system in Islamic countries. If they could have provided a successful educational system encouraging development in the positive sciences and technology, the process of development and the present situation of Islamic countries would have been a lot different from what it is today1. Islamic scholars, the labor force and the ordinary people would be better endowed with the proper knowledge to follow the most recent scientific and technological developments, which in turn would lead to the creation of new technologies or the discovery of new facts in the positive sciences. At least, the development gap between the Western Christian countries and the Islamic countries would be narrower that it is today.

Until recently, the educational system in the Medrese (the Islamic school) was based predominantly on the teaching of the tenets of Islam. Non-religious education was ignored. Being a “good Muslim” was the primary if not, the only, goal of the Islamic education system for centuries. Some weak attempts to challenge this approach were not successful. Ihsanoglu states with regard to the scientific and technological development during the 600 years of the Turkish Ottoman Empire; “… the Western idea of controlling nature through science and technology was unknown for the Ottoman scholars because of their convictions based on Islam.” (Ihsanoğlu; 1996; 28). Word was that; “new inventions were prohibited2.”

← 15 | 16 → In the past, Islamic scholars once had a multi-dimensional education system and the natural sciences such as physics and astronomy were considered as a part of the “Philosophical thinking and teaching” curriculum in the Medrese. But, due to religious ideological differences among Islamic scholars, a strong opposition emerged against the philosophical subjects. As time passed, these opponents gained ground and eventually the study of “philosophy” became an “undesired” subject in the Medrese education system.

For example, about 1,000 years ago, the positive science subjects such as physics, chemistry and astronomy were the favored subjects in the “philosophical thinking” curriculum. Islamic philosophers of the time had a great interest in these subjects and developed many original ideas which made a serious contribution to the further development of science. But, as time passed the attitude towards philosophy and the philosophers changed and some Islamic scholars began to criticize these philosophers relentlessly. This negative attitude grew rapidly gaining support from rulers who preferred to have loyal and totally obedient subjects. After all, the ruler was considered as a person “chosen” by Allah and Allah must be obeyed totally! So must his regents on earth!

The thoughts of the well-known Turkish philosopher İbn Sina (known as Avicenna in the West) were denounced as an “enemy of Islam” and he himself was named an “infidel” by these opponents of philosophy who harshly criticized and unfairly judged him (Boer; 1960; 111-112). According to one opponent’s remarks:

“It is useful that a man works on ‘Fiqh’ the Islamic law which is his nurture. But, philosophy could be a fatal poison; because the man would be open to doubt and might easily lose faith.” (Boer; 1960; 111-112).

It is said that:

“(What)… Sharia stands for is prerogative, while philosophy which opposes it, stands for superstition” (Bolay; 1993; 24).

These anti-philosophy centered Islamic scholars actually prevented the development of;

Details

Pages
199
Year
2014
ISBN (PDF)
9783653047660
ISBN (ePUB)
9783653980424
ISBN (MOBI)
9783653980417
ISBN (Hardcover)
9783631654927
DOI
10.3726/978-3-653-04766-0
Language
English
Publication date
2014 (July)
Keywords
Prophet Mohammed Zinstheorie Koran
Published
Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2014. 199 pp.

Biographical notes

Hasan Gürak (Author)

Hasan Gürak studied in Germany, England and Sweden and obtained his doctoral degree at the University of Istanbul. Presently he is engaged in academic research in the field known as «Heterodox Economics», aiming to develop alternative theories and analyses in mainstream economics.

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Title: Islam and «Scientific» Economics