Islam versus Economics
pre-publication Draft: Chapter 2 in Handbook on Islam and Economic LIfe, edited by Kabir Hassan and Mervyn Lewis, Edward Elgar Press, (2015).
26 Pages Posted: 28 Jul 2013 Last revised: 24 Jun 2015
Date Written: July 27, 2013
An earlier & longer version of a draft of this paper, with title “Islamic Approaches to Fundamental Economic Problems,” is available from http://ssrn.com/abstract=2231398
Because Islam focuses on success in the hereafter, while economics focuses on maximizing pleasures of this world, the two are fundamentally opposed. Economic theory is concerned with maximization of wealth, while Islam is concerned with using wealth to achieve spiritual development. In contrast with homo economicus, Islam offers a dynamic and complex view of a battle between conflicting tendencies within the hearts of men. Instead of evaluating men and societies in terms of their ability to produce wealth, wealth is seen as a means of purifying the heart. Islam seeks to transform men and societies in directions not envisioned in contemporary economic theory. This requires a radically different approach. Conventional approaches are based on the idea than human beings are selfish, and that competition will lead to efficient outcomes in the economic sphere. Islam acknowledges the existence of these base tendencies, but argues that we can build better societies by combating them, instead of yielding to them. It is possible to build societies around the principles of generosity at the individual level and cooperation in the social, political and economic spheres. Details of desirable human behavioral, and how to create such behavior are provided. Institutional structures which conform to and support such behavior in Islamic societies are described, and differences from current capitalist institutions are delineated.
Keywords: Islamic Economics, Human Development, Wealth, Waqf
JEL Classification: B29, B41
Suggested Citation: Suggested Citation