Re-Defining Islamic Economics Through a Purely Islamic Perspective

* 9th International Conference in Islamic Economics and Finance Growth, Equity and Stability: An Islamic Perspective Session 1: Islamic Economics in Theory and Practice Chair: Nejatullah Siddiqi Re-defining Islamic Economics (Asad Zaman)

*Re-Defining Islamic Economics Dr. Asad Zaman, Director General, International Institute of Islamic Economics International Islamic University, Islamabad

Economics Islam *Generosity *Cooperation *Service to Mankind for the sake of Love of Allah *Morality is CENTRAL to Message of Islam *Halal Earning, Responsible Use, Permissible Disposal *Self-Interest *Competition *Accumulation of Wealth *Scientific Knowledge excludes Morality *Earn ANY way, Absolute Rights to Private Property *Islam VERSUS Economics

*IE = Capitalism Interest + Zakat *More than TEN existing definitions: All are MIXTURES of Islam and Economics. * IMPLICIT ASSUMPTION: Islam does not provide us with complete guidance on management of our economic affairs RE-DEFINE IE from PURELY Islamic Sources *Existing Definitions: IE = Economics + Islam

Islamic Economics is the EFFORT/STRUGGLE (Jihad) to implement the orders of ALLAH in our Personal Lives (Individual) == Islamic Micro Communities Ummah No mention of NATION == Conventional Macro == Islamic Meso == Islamic Macro *Proposed Definition

*Ten Dimensions of Contrast & Superiority Ten ways in which new definition, based on purely islamic concepts, improves upon earlier work

*(AllahTaala) taught man what he did not know! *Revealed Knowledge is Essential Part of Human Knowledge. *Morality is Essential Part of Human Knowledge *NEITHER is Scientific *Scientific Knowledge *Observations + Logic *Revelation is NOT Scientific Knowledge. *Morality CANNOT be derived this way therefore, not part of human knowledge. *Theory of Knowledge

Whoever among you sees an evil action, then let him change it with his hand [by taking action]; if he cannot, then with his tongue [by speaking out]; and if he cannot, then with his heart and that is the weakest of faith. Neutral and Detached observation of economic injustice is NOT permitted. Struggle Against It. This is REQUIRED of a scientific observer. Scientific Methodology assumes LAWS change is not possible for Universal Laws. *Neutral & Detached Observation

*Humans have deterministic behavior (like particles) *They CANNOT be changed, *They obey mathematical laws (like particles). Our Prophet SAW changed the course of history. IE is transformative Change the world: Asfala Safileen Ahsane Taqweem Task was accomplished by our Prophet. IE is Transformative Econ is Positive

*Economics CLAIMED to be Positive Science.Muslims ACCEPTED this claim *That is WHY Muslims define IE = Econ + Islam. *The IDEAL Economic system is Perfect Competition. *1st& 2ndFundamental Welfare Theorems: Free Markets Achieve Welfare Optima, All Welfare Optima CAN be achieved by Free Markets. *Perfect Competition & Free Markets DON T EXIST *COMPARE NORMS: Selfishness & Cut-throat Competition VERSUS *Economics is (also) Normative

*Quran CANNOT contradict facts. If Economics is POSITIVE, then we must re-interpret Quran. *Scarcity Versus Fazlullah (re-interpreted) *There is enough for needs, but not for greed. *Utility Maximization VS. Spend your BELOVED *Development is Accumulation of Wealth. *Only spiritual & human devlopment in Khair-ul- Quroon (BEST of TIMES). *Existing Definitions make Quran conform to Economic Theories

*Consumers are Cold, Callous, Calculating. *Maximization: more is always better. *Spend for Love of Allah, care for others, do not count spending *Moderation: No Israf or Tabzeer. *Learn to be content with what you have (Shukr). METHODOLOGY: People CAN be like this. Change them METHODOLOGY: people ARE like this objective, positive. *IE: Consumer Behavior

IE: Use Profits to Provide Service *Value of Actions rests upon intentions. *The provider is blessed, and the withholder is accursed IbneMajah 2238 *Intention to serve leads to blessings. Intention to profit by withholding is accursed. Econ: Use Service to Make Profits *Adam Smith: Producers seek profits, but end up providing service to society. *Milton Friedman: Only business of business is to make maximum profits. *Zuboff (Harvard MBA Prof): Pursuit of Profits has caused suffering, bad name for capitalism CSR *IE: Producers

IE: Cooperation *be not divided among yourselves; and remember with gratitude Allah's favour on you; for ye were enemies and He joined your hearts in love, so that by His Grace, ye became brethren *Creation of Neighborhood Communities is KEY to Islamic economy. *IE: Meso-Economics Econ: Competition *Theory: Survival of Fittest, Promotes Efficiency. *Practice: Law of Jungle concentrates wealth in hands of powerful. *Top 0.01%: $27,000,000 *Bot 90%: $ 31,000

IE Macro: Ummah *Brotherhood of Mankind *Justice, even to enemies. Objection: Ummah does not exist. 21:92 VERILY, this community of yours is one single community Macro: Nation *Beggar-thy-Neighbor policy *Rivalry/Warfare taken for granted. *Spending on arms, defence, enough to feed, clothe, house, educate, and provide healthcare for entire planet *IE: Ummah & Humanity

IE: Process Oriented *How did everybody get more? By exploiting others? *It is the STRUGGLE to create a better world which matters. Whether outcome is failure of success DOES NOT. Shaheed or Ghazi both are success Econ: Consequentialist *If everybody has more, Pareto improvement. *Evaluation of Welfare is ONLY based on final consumption bundles, not on process by which it is obtained. *Process, not Outcomes

*TEN DIMENSIONS of RADICAL DIFFERENCES have been listed. *How can OPPOSITES be combined? *Earlier Definition have failed because they attempted to combine opposites. *Islamic Teachings in Economic Realm are sufficient, and not in need of supplementation especially not by contradictory teachings. *Summary & Conclusion