A Note on Islamic Economics

1. A Note on Islamic Economics See Marcus Noland, ―Religion, Culture, and Economic Performance‖ Institute 5 for International Economics, 2004 (e-mail:mnoland@iie.com). Two other recent empirical research in religion and economics are: Luigi Guiso, Paola Sapienza, and Luigi Zingales ―People‘s Opium.‖ Religion and economic attitudes; Journal of Monetary Economics, Vol. 50, 2003, (pp. 225-282). This paper concludes that ―on average, religious beliefs are associated with ‗good‘ economic attitudes‖ and that ―Christian religions are more positively associated with attitudes conducive to economic growth.‖ But, see their sample and questions on pp. 234-237. The second recent empirical paper is by Robert J. Barro and Rachel McCleary ―Religion and Political Economy in an International Panel,‖ Working Paper No. 8931, National Bureau of Economic Research, May 2002. The paper finds that ―growth responds positively to enhanced religious beliefs...,‖ but also see their sample and regression results. Interesting insights on growth of Islam in Africa are provided in ―Transaction costs and Islam: Explaining Conversion in Africa‖ by Jean Ensminger, Journal of Institutional and Theoretical Economics, Vol. 153, 1997 (pp. 4-40). She makes a case that Islamic institutional structure ―was one of the most available and effective‖ systems, which, until recent times, provided ―solutions for the institutional problems of trade.‖ This was, according to the author, the reason for the voluntary African conversion to Islam and ―it can sometimes explain the preference for Islam over Christianity.‖ She points out that the major advantage of Islam is that it ―reduced transaction costs,‖ and that ―the fact that Islam was also a religion and not merely a set of secular institutions further reduced the transactions costs of exchange. Islam was a powerful ideology with built-in sanctions which contributed to considerable self-enforcement of contracts‖ (pp. 7-8). The paper also discusses other Islamic institutions such as commanda (modharaba). Also note the position of this paper on trust: ―Islam thus plays at least two roles in relations to trust, firstly by establishing mutual commitments and obligations as fellow members of the ummah (Islamic community or fraternity), and secondly by providing the criterion of religiosity as a signaling device for reliability, which in turn becomes the basis for trust‖ (p. 39). There are also a few valuable papers on economics and religion by Howard Margolis, ―Religion as Paradigm‖ in Journal of Institutional and Theoretical Economics (JITE), Vol. 153, 1997 (pp. 243-252); see also comments by Heinz Hollander (pp. 253-258). See also Eilert Herms, ―Religion, ethics, the economy and economics,‖ JITE, Vol. 153, 1997 (pp. 182-206), and comments by David Reisman and Gisela Kubon-Gilke. In the main paper, the author defines a concept of ‗ethos‘ and ―considers religion, the economy, and economics as subsystems of any ethos.‖ Herms defines ethos to be ―conceived as a system of interaction covering the whole range of the essential functions of a society and shaped from within by convictions concerning the origin, the constitution and the destiny of reality and of human life within it.‖ On economic analysis of religion, see James D. Montgomery ―Contemplation on the Economic Approach to Religions Behavior.‖ The American Economic Review, Vol. 86, No. 2 29