Articles on Islamic Economics

Physiological and Psychological Dimensions of Scarcity

Salman Ahmed Shaikh

Resources are scarce as compared to unlimited wants. But, the economics of non-rival ideas creation has proved that resources are ample and that physical resources could be used in ways that keeps fulfilling the basic needs of society through the creation of ideas that augment and bring multiplier effect to the availability of given physical resources.

In simple words, the development in science and technology by developing human capital base has enabled the societies through each point in history to make best use of physical resources and avoid resource exhaustion for the basic requirements.

Despite that, problems like poverty have persisted and even got severe in some regions particularly in the last century. The main part of the problem is not with resource scarcity, it is with distribution of resources which require an equitable and egalitarian socio-economic system. What is needed is a system that consists of institutions working towards fulfilling this objective.

Capitalism, the way it is practiced as an economic system, has largely allowed and promoted certain institutions and their operations based on free market philosophy and such institutions have been chief reasons behind much of distributional inequity in the world today.

Interest based financial intermediation in theory and in practice has exhibited increased concentration of wealth in the world. A system is not an end in itself; rather it is meant to serve the needs of society at large amicably. Indeed, when we glance over statistics of poverty on one hand and rising inequality on the other, we ought to question the merits of such institutions or at least the way they operate. Indeed, even in free market philosophy, we do not allow certain institutions which bring harm to the society and individual liberty. But, yet, so far, we have turned limited attention towards critically evaluating the intricate system of interest based financial intermediation.

In its economic policy outlook, Islamic economic system is a blend of natural features present in Capitalism i.e. right to private property, private pursuit of economic interest and use of market forces along with some distinct features derived through Islamic economic teachings i.e. interest free economy, moral check on unbridled pursuit of self-interest and provision of socio-economic justice to achieve the somewhat similar economic goals of Socialism as far as is naturally possible without denying individual freedom and incentives.

Another aspect of resource scarcity is completely psychological rather than physiological. Humans compare themselves relatively to their contemporary peers. Indeed, we, as individuals have much more facilities and better standard of living in material terms than even the kings of the past. But, even that does not satiate our hunger and sense of relative deprivation as we suffer by comparison.

Religion provides such meaningful conditioning which makes us bring the right balance between our aspirations and physical limits. Religion also promises salvage from the limits of this worldly life in heaven to the most righteous people. This, in turn, provides a permanent incentive to choose righteous behavior as an end in this world with the hope and fear of deterministic results in life hereafter.

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