Methodological Dimension of Islamic Economics

Masudul Alam Choudhury

• Publisher: WSPC
• Year: 2019
• ISBN:
  9789813276031
• Topic: Economics
• Subtopic: Macroeconomics
• Index: Economics

The theme of circular causation has nascent origin in the field of sociology of economics with vast development applications and with epistemological issues on modeling in the framework of the phenomenon of pervasive interconnectedness. Thus the sociological theme of epistemic unity of knowledge grounds the theory and application of the theory and models of circular causation to the vast realm of socioeconomic development issues.

The theory and application of circular causation has methodological similarities with Gunnar Myrdal's theory of social causation and Joseph Schumpeter's and Hayek's learning models of evolutionary phenomena. One can re-engineer many important works by sociological economists in and by the methodology of circular causation. Among these other important works are capabilities and functioning by Amartya Sen; John Rawls' evolutionary good society aspiring for social justice; adaptation of Ilya Prigogine's theory of being and becoming to social, economic and development phenomenon; and George Soros' theory of reflexivity in history and financial markets. The proponent of this book has pioneered the area of theory and application of circular causation extensively.

Contents:

• Prologue
• Preface
• About the Author
• Acknowledgment
• List of Figures
• List of Tables
• How to Study Islamic Economics as a Science in Reference to the Qur'an and the Sunnah
• Tawhidi Islamic Economic Methodology
• The Scope of Tawhidi Islamic Economics (TIE)
• The Formulation of Islamic Economic Model
• Islamic Participatory Instruments and the Ethical Dimensions
• The Dual Theories of Consumer Behaviour and Markets
• Dual Theories of the Firm
• Macroeconomic Theory in Mainstream and Tawhidi Islamic Economic (TIE) Perspectives
• Monetary, Financial, and Real Economy Issues in TIE in Comparative Perspectives
• Conclusion: What Have We Learnt? Quo Vadis?
• Index

Readership: For readers who are keen to understand the difference between Islamic Economics and mainstream economics.Epistemic and Economics;Economic Theory;Economic Analysis;Applications;Comparative Economics0 Key Features:

• Popular rise of books in Islamic economics and finance
• Presently missing competing textbook in methodological treatment of Islamic economics
• Addresses a global academic market in respect of scientific treatment of new economic epistemic theory and applications

Chapter 1

How to Study Islamic Economics as a Science in Reference to the Qur′an and the Sunnah

Islamic economics began around 70 years ago with the works of some Indian scholars in the field. The King Abdulaziz University Center for Islamic Economics records the origin of the contemporary approach to the study of Islamic economics to be 30 years ago. The works of the great Islamic scholars, the mujtahids, such as Imam Ghazali, Ibn Taimiyya, Imam Shatibi, Ibn Qayyim, and Ibn Khaldun, recorded the study of Islamic economic and social problems either in reference to the Qur′an and prophetic teaching, the sunnah, or independent of these as intellection borrowed from Greek social and economic thoughts. The latter examples are of Ibn Khaldun (Rozenthal, 1958) and the Muslim philosopher of Greek vintage, Al-Farabi (Waltzer, 1985). The use of the terminology “Islamic economics” is an imitation of contemporary times. It reflects the classification of educational disciplines left to us by the Occidental world. Such classification was devoid of the holistic beginnings of intellectual thought in which all Muslim scholars had drowned themselves in the search of knowledge, not of this or that discipline, but of all disciplines as a holistic methodological worldview.

Thus, while the classification of the disciplines carried with it the specialization and independence of the areas of learning as separable activities, while the spirit of holism disappeared, Islamic economics, by its contemporary term, also became one of the emergent ways of such thinking. Yet, such an emergence of the Islamic economic discipline gradually caused a methodical dissociation of the nature of Islamic moral and ethical issues that are inherent in the framework of the theory of knowledge (TOK) arising from the ontological and epistemological foundations of the Qur′an and the sunnah. As the spirit of western erudition entered lock, stock, and barrels in Muslim acceptance, the originality of Islamic science and society including economics never took any foundational origin, shape, form, and critical learning pursued via Islamic epistemology, meaning the TOK. This marked the departure of the Islamic methodological worldview and its potentiality to contribute and sustain the Islamic originality, erudition, epistemology, and consequential analytics to the world of learning. Islamic economics entered the scene of the classified disciplines in such a subservient state. Consequently, almost all of its argumentation, modeling, formalism, applications and inferences took the path of the western interpretations. See Mahomedy (2013) for an incisive and insightful critique of the existing field of Islamic economics. Nonetheless, high potentiality remains for Islamic economics as a discipline of metascience that is grounded on the Islamic epistemological foundations. These are the exegesis of the Qur′an and the sunnah in respect of the Tawhidi methodological worldview.

Present days’ Islamic economics as a terminology is in such a dire state. It is not original, failing to be derived from the teachings of the Qur′an, the sunnah, and many of the Islamic scholastic leaders. This is not to mean that the Qur′an is the divine book of science. Rather, the Qur′an is the revealed book of guidance for those who seek guidance.¹ Yet, the Qur′an is the book complete and final in knowledge. It thereby provides guidance for all issues of mind and matter, and thus of science, economics in its metaperspective of morality and ethics embedded in materiality.

Islamic economics in its present state does not have a theory and foundation that can be called truly “Islamic” in terms of its systematizing the world of economic and social learning in a holistic way. The methods and models of Islamic economics today ignore the need for modeling the Islamic morals and ethics. The implications are thereby a borrowing and an interpretation that is either crassly Islamic in name, yet without the spirit, rigor, and foundations. Or it is stereotyping the western methodological worldview. Only an outer semblance of Islamic values is attached to the economic reasoning of present days’ notion of Islamic economics.²

Present state of the study of economics

The Royal Economic Society points out that smaller universities in the United Kingdom have abandoned exclusive focus on economics after the year 1999. Yet, the larger universities in the United Kingdom by virtue of their advanced ideas in economic reasoning and by integrating related disciplines have flourished. One such area that has arisen in the larger universities is heterodox economic theory.

Subsequent to the period of Islamic economics in its heydays in the Muslim world, Islamic economics has by and large been supplanted by the now-stylized caption of Islamic finance. This is an equally problematic field with its western imitation having only a palliative of Islamic instrumentation. This garb of Islamic finance is not epistemologically different and revolutionary in nature in the annals of erudition and originality.

The problem of Islamic learning started when it got increasingly dissociated away from its epistemological origin in the Qur′an, the sunnah, and intellectual discourse around these to raise what is called “ijtihad”, authentic research based on epistemological foundations. This being the case, the axioms, assumptions, nature, methodology, and applications of the core of Islamic economic reasoning, namely morality and ethics, are marginalized by their substitutes in commercialism and materiality. The example is the present failing of Islamic banks. They raise large equity values from the shares market. Yet, they remain oblivious of the cognition and practice of the Islamic methodological worldview applied to the commercial arena.

According to orthodox economic theory to which neoclassical economics belongs, the principal attribute of rational choice-making in goods and services is “marginal rate of substitution” between competing goods and services for the command over scarce resource allocation between such competing ends. We will also refer to this neoclassical premise as “marginalism”. Likewise, Islamic economics immersed in mainstream orthodox economics could not belong to the holistic sociological economic school. This was caused by it being immersed in the traditional microeconomic and macroeconomic branches of mainstream reasoning. There was blind acceptance to the underlying postulates of orthodox and mainstream economics with their traditional orientation. Although such orientations are being seriously questioned in mainstream economics by the works in rational expectation theory. The fields of microeconomic foundations of macroeconomics were the results of such theorizing. In Islamic economics of today, such original ideas of formalizing the ethical place of microeconomics in the development of the macroeconomic consequences did not arise. Islamic economics thus blindly followed the traditional theories of microeconomics and macroeconomics. Yet, in none of these following, there is any robust theory of ethical integration in economic theory, formalism and application.

The major problem of Islamic economics like Islamic finance, Islamic banking, and other Islamic socio-scientific ventures is that it has no articulated epistemological foundation. On the other hand, any science, social or natural in category, ought to be based in solid epistemological foundation. Such an orientation subsequently gives shape, form, axioms, assumptions, and methodological formalism to the entire body of theory and application. Einstein (Bohr, 1985) said that science without epistemology remains muddle-headed.

The rise of heterodox economics in the recent times is of a deeply ontological and epistemological type. Even neoclassical economics is epistemological in nature according to its own axiom of economic rationality. Classical economics is thoroughly epistemological in reference to the Theory of Moral Sentiments as Adam Smith’s first great epistemological contribution to economic reasoning. All of the science as we have inherited rests on the epistemology of heteronomy. Heteronomy conveys the nature of dualism between a priori and a posteriori domains of reasoning. We will discuss such issues in the subsequent chapters to bring out the distinctive difference between rationalism of the occidental theory of science and the episteme of unity of knowledge of the Tawhidi methodological worldview.

Tawhid as the Islamic methodological worldview: the advent of Tawhidi Islamic Economics (TIE)

Contrary to all such epistemological moorings, today’s Islamic economics, and likewise, all other Islamic socio-scientific fields in the recent times have not been able to formalize and contribute to the internal dynamics and functioning of the primal axiom of the entire Islamic methodological worldview upon which a metascience can be erected. This is the ineluctable axiom of Tawhid as the monotheistic law of unity of knowledge. It exists not simply in utterance. Rather, as Imam Ghazali said (Karim, n.d), the understanding of Tawhid as methodological worldview has 60 stages with increasing depth. Islamic economic casually adopted an utterance around the outer husk of declaring Tawhid (belief) without knowing its world-system dynamics and axiomatic character in the building of socio-scientific thought, metascience, and applications (Naqvi, 2003).

The Tawhidi methodological worldview is the universal and unique foundation of all Islamic intellection. It is formal in nature if properly utilized for the construction of the cognitive and material world system and its specifics. Such a formal intellection with its methodology, methods, and application is equally applicable to the building of metascience in the entire world of learning. On the indispensability of the Tawhidi methodological worldview in the mundane world system, Ibn Arabi wrote in his Futuhat (Chittick, 1989): “The first way is by way of unveiling. It is an incontrovertible knowledge, which is actualized through unveiling and which man finds in him. He receives no obfuscation along with it and is not able to repel it. The second way is the way of reflection and reasoning (istidlal) through rational demonstration (burhan ‘aqli). This way is lower than the first way, since he who bases his consideration upon proof can be visited by obfuscations which detract from his proof, and only with difficulty can he remove them.”

The Islamic economic approach, which only utters Tawhid at the beginning and at the roots, is unable to formalize the monotheistic meaning as a methodology, formalism, and application. Contrary to this narrow attitude is the induction of the progressive knowledge of unraveling the Tawhidi methodological worldview into science and economics. We will thereby refer to the Tawhidi epistemological foundation of Islamic economic science by the term “Tawhidi Islamic Economics” (TIE).

In TIE consequently, the Kantian problematique of heteronomy between the moral imperative of the a priori domain and the practical reasoning of the a posteriori domain has entered Islamic socio-scientific thought in general and Islamic economics and finance, in particular, in the most surreptitious way. Heteronomy is of the nature of rationalism in causing dichotomy between the moral law (Tawhid =a priori) and the world system (a posteriori). Contrarily, the Qur′an presents the moral and cognitive world systems as being unified and indivisible holism. It bears its endogenous dynamics of organic unity of being and becoming concerning mind and matter. The Tawhidi methodological worldview is thus indispensably required to give the universally and uniquely original, revolutionary, essential Islamic foundation to what may be referred to as TIE and finance, science, and society (Choudhury, 2014).

As was mentioned above, Islamic socio-scientific intellection in general and Islamic economics and finance, in particular, have not been able to blaze the emergence of a field of heterodox economics. Heterodox economics by itself is a deeply ontological and epistemological inquiry (Lawson, 2003). If the ontological and epistemological foundations of the Qur′an and the sunnah are missed out, then the constructive dynamics of the Tawhidi foundation cannot be understood. This is equivalent to uttering but not knowing how to cognize and apply the methodology of Tawhid in the building of metascience for rendering to the world of learning. Will it stay this way? Have not the Qur′an and the sunnah given the challenge to raise the world system to the pinnacle of knowledge for the global wellbeing? The possibility is not to be found in the present state of Islamic thought by missing out the episteme of Tawhid. Yet, substantive efforts and contributions in this direction have been made.

The nature of Islamic economics according to the Tawhidi episteme

This book elaborates on the epistemological methodology of Tawhid in the groundwork of a heterodox Islamic economics and finance. The resultant Tawhidi methodology is found both to be rigorously analytical, invoking science, formalism, and analytical depth as well as universal application to particular issues and problems. It is a gross mistake and complete denial of scholarly knowledge to say that Tawhid is sheer philosophical, and th...

Table of contents

• Cover page
• Title page
• Copyright
• Prologue
• Preface
• About the Author
• Acknowledgment
• Contents
• List of Figures
• List of Tables
• 1. How to Study Islamic Economics as a Science in Reference to the Qur′an and the Sunnah
• 2. Tawhidi Islamic Economic Methodology
• 3. The Scope of Tawhidi Islamic Economics (TIE)
• 4. The Formulation of Islamic Economic Model
• 5. Islamic Participatory Instruments and the Ethical Dimensions
• 6. The Dual Theories of Consumer Behavior and Markets
• 7. Dual Theories of the Firm
• 8. Macroeconomic Theory in Mainstream and Tawhidi Islamic Economic (TIE) Perspectives
• 9. Monetary, Financial, and Real Economy Issues in TIE in Comparative Perspectives
• 10. Conclusion: What Have We Learnt? Quo Vadis?
• Index