A Note on Islamic Economics

1. A Note on Islamic Economics effort, the present generation will need to clearly position its understanding of Islam as it pertains to the economic (in its substantive meaning) behavior as well as on the applicability of formal economics and its methods as they relate to that understanding. The present efforts to forge a consensus-based name or definition for Islamic economics, however, should not deter research in understanding Islam in its relation to economic behavior awaiting a consensus on a clear definition which will emerge in due course. 10. There is no avoiding the fact that in Islam all behavior is rules-based, that ethical values underlie the rules, and that the source of the rules is Allah (s.w.t.). Man knows the presence and force of these rules and the ethical values from the revelation— either directly from the Quran, or indirectly from the actions and sayings of the behavior that represented the most perfect implementation of the rules of the Quran: that of the Messenger º≪°SH ¬DBGH ¬«≪Y ˆG ≈≪°U . Man also possesses the fac of reason to understand the ethical propositions and the prescribed rules, and can apply the same faculty to deliberate when faced with a decision. To the extent that man uses this process of deliberation and reasoning to understand the ethical propositions and the rules contained in the Guidance of the Creator, and to arrive at decisions, it is rational.18 Not only does the Quran rely strongly on reasoning, but also it prescribes and specifies the domain of observation, intellection, and (¢ùØF) to reasoning for man, which begins from the depth of the individual‘s self (¢VQC‟GH äGHɪ°ùDG äƒ≧≪E) . the depth of the universe 11. Neoclassical economics, relying on the ‗means-ends‘ definition and the ‗self- interest‘ hypothesis, postulates that the individual‘s behavior is rational in the sense that, faced with a choice, the decision-maker prefers more to less. The individual is the source of ontology and epistemology; all the needed knowledge is there for consumers to maximize utility, producers their profits, and society its welfare. The strong assumptions in neoclassical economics—the self-interest hypothesis and the rationality postulate—as well as the theorems of welfare economics have received considerable criticism from a variety of view points. Over the last four decades, a number of new fields of enquiry have developed within economics to deal with the shortcomings of the neoclassical economics. These include, inter alia, the fields of ‗bounded-rationality‘, ‗information economics‘, ‗contract theory‘, ‗behavioral economics‘, ‗experimental economics‘, ‗non-cooperative game theory‘, ‗the new institutional economics‘, and ‗cognitive science‘.19 12. Intellectual developments in each of the above-mentioned areas should hold considerable interest for Islamic economics. It would certainly be helpful to the development of the discipline if there were agreement amongst the scholars that there was no need to reinvent wheels. For example, very little effort is made at the present to understand empirically the behavior of Muslims, including the observed dissonance between rules and behavior or ideal and reality. In this regard, 13