What is Economics
lecturer:
Muhammad Anas Zarka
(Professor, Senior advisor,
Shura Sharia Consultancy, Kuwait,
12 Oct 2010 = 4 Zul Qidah 1431 H
Prerequisites:
• I assume participants had at least two
introductory courses in conventional
economics, and familiarity with basic Islamic
Sharia and fiqh concepts.
Lecture Objectives:
• To demonstrate the relevance of Islamic
economic rules and goals to conventional
economics; and vice versa : the relevance of
conventional economics to some Islamic rules
and goals.
Definitions:
• Islamic rules are the do’s and don’ts which we
derive from Sharia (The Quran, and authentic
Sunnah) and from the fiqh.
• Islamic goals : I discuss later only the top
three primary goals, all explicitly stated in The
Quran. There are other goals, primary and
derived, which are not addressed in this
lecture
Islamic economic goals :
• Fulfillment of Basic needs of every member in
society .
• Reduction of Income and wealth inequality.
• Attainment of economic power and
independence
Economics Defined
• economics is a social science ....
• It studies the production of goods and
services
• Their distribution ( how they are shared
among members of society )
• The consumption of goods and services
What are the main components of
Economics?
• Economic analysis
• economic systems
• Economic Policies
Economic analysis
• It describes economic reality and classifies it
into useful categories,
• then tries to discover economic laws ( stable
relationships of cause – effect among
economic variable s ).
• Analysis is the “ descriptive , or positive “
component of economics
economic systems
• An economic system is a set of NORMS
(GOALS ,RULES and INSTITUTIONS ) which
society prefers to observe in its economic life.
Thus a system is the normative part of
economic life.
• Islamic Sharia is the source of an Islamic
economic system.
Comparative economic systems
• This used to be one main part of Western
economics textbooks ,but has now
disappeared . Why?
• “End of History” attitude, now shattered by
the financial crisis.
Economic Policy
• This is the study of ways by which we can
move from one economic situation to another
which is closer to society’s goals.
• Any economic policy can NEVER be totally
objective ( depends only on economic
analysis of cause –effect ). It must also have a
“value component” which is derived from the
system we prefer.
Islamic Economic Goals
• These can be derived from Sharia, and are
subject to IJTIHAD.
• I select for this lecture only Three primary
goals.
• I list and may refer a little to other derived
goals. They are worthy of your further
consideration.
‫‪Goal One:‬‬
‫‪• Fulfillment of Basic needs of every member in‬‬
‫‪society .‬‬
‫{كال بل ال تكرمون اليتيم والتحاضّون على طعام المسكين }اآلية •‬
‫{انما الصدقات للفقراء والمساكين ‪ }...‬اآلية •‬
Goal Two
Reduction of inequality
• Reduction of Income and wealth inequality.
59:8 ‫• {كيال يكون دولة بين األغنياء منكم } اآلية‬
• { ..so that it [wealth] may not merely circulate
between the rich among you } 59:8
• As far as I know, Islam is the only religion
whose Holy Book explicitly states such goal.
Goal Three
power and independence
• Attain economic power
• Attain economic independence (‘izzah ‫(عزة‬
8:60 ‫ٱس َت َط ْع ُت ْم من قُ َّوة} – االنفال‬
ْ ‫• { َو أَعِ دُّو ْا َل ُه ْم َّما‬
• ‫سولِ ِه َولِ ْل ُم ْؤ ِمنِينَ } المنافقون‬
ِ َّ ِ ‫{ َو‬
ُ ‫ّلِل ٱ ْلع َِّزةُ َول َِر‬
63:8
Goal Three Explained -1
power and independence
• Economic Power means ability to do and
achieve what you want in economic life. It is
relative to what others can do.
• Economic Independence from others means
.....
Other Derived Goals
• Economic Efficiency
• Generation of economic surplus to support
furuz kifaya ( socially obligatory duties)
• Full employment
• Economic development
The Method of this lecture
• Select a conventional economic issue or
concept
• Explain it briefly when necessary
• Check its relevance to Islamic economic goals
• Check its relevance to Islamic economic rules
MICRO-ECONOMIC Issues
• Scarcity : fact or fiction? Does it persist if
Sharia is fully applied?
• Consumer behavior : moderation- israaf –
taqteer – tabzeer .
• Consumer Utility
• Efficiency : is it a Sharia goal?
• Types of The business Firm.
• Firm’s Objectives : the Profit maximization
issue
MACRO-ECONOMICS-1
• Aggregate Income and its components :
Consumption, savings and Investment, Exports
,Government expenditure.
• Macro economic statistics : Their Sharia
importance.
MACRO-Issues -2
• Growth and Development.
• Physical capital and human capital as
necessary factors.
• Knowledge as capital. Its special properties:
cumulative , non-exclusive( same as public
goods). No depreciation. Not subject to
diminishing returns?
Social capital
• Meaning
• Great significance to economic efficiency and
development .
• Emphasis by the institutional school in
economics.
• Very close to concept of (salahu zati al-bayni ).
• Worthy of further research. Social justice
Distribution -1
• Factor incomes -the functional distribution:
wages ,income from property, profits
• The personal distribution. Monitoring poverty
• Sharia approach to both distributions is very
different.
Interest income= usury
• Usury : any stipulated increase above the
principal of a loan is a strictly prohibited
income.
• Financing by Sharia compliant commercial
transactions generates halal income which is
integrated with exchange, hence is part of
profits.
The motto of Islamic economics
‫• { َو َل َقدْ َك َّر ْم َنا َبنِي َءادَ َم َو َح َم ْل َنا ُه ْم فِي ٱ ْل َبر َوٱ ْل َب ْح ِر َو َر َز ْق َنا ُه ْم‬
َّ َ‫من‬
ِ ‫ٱلطي َبا‬
- } ً‫ض ْل َنا ُه ْم َع َل ٰى َكثِير م َّمنْ َخ َل ْق َنا َت ْفضِ يال‬
َّ ‫ت َو َف‬
70 /17 - ‫االسراء‬
• Verily we have honored the Children of Adam.
We carry them on the land and the sea, and
have made provision of good things for them,
and have preferred them above many of those
whom We created with a marked preferment.
Al Quran 17:70
The Motto implications
• From this Ayah, and the fact that some
persons cannot produce sufficient income to
fulfill their basic needs, you can logically
derive the first and second goals of Islamic
economics, and many others .
• The Ayah is universal: provision of any useful
good or service to any human being fulfils a
Divine goal, hence has intrinsic moral value in
Islam.
Wa al SalaamAlaikum