Islam and Welfare Economics

Islam is not just an economic system, but, a comprehensive doctrine. A comprehensive doctrine is not just concerned with one particular aspect of human life; rather it is concerned with all aspects of human life.

As per Islam, this worldly life is a test for humans. The nature of this test requires human interdependence which then requires difference in ranks, endowments and abilities. This consequently results in difference in wealth and incomes that people have. But, then, both, the rich and the poor as part of this test are going to be judged on the basis of how they each individually act on the benchmarks of thankfulness, patience, obedience and upholding ethical guidelines prescribed by their Creator for them through an inbuilt conscience and through guidance provided via sending Prophets (peace be upon them all).

Humans are much more than utility maximizing machines. They are capable of using both material rationality and moral rationality to differentiate right from wrong. They need reinforcement to adopt virtues influenced by an inner urge other than just material interests. This inner urge can be reawakened by looking beyond utility maximization models to re-acknowledge the principal fact that humans are moral being than just an instrument for maximum material advancement for self.

History of economic man is fascinating. He has used the nature’s blessings to find and create new and innovative ways of maximizing utility. But, nonetheless, at all points in time, he does not feel satiated. He remains poor ‘relatively’ to the limitless desires and nature’s limitations. The dream of being absolutely apart only remains a dream in everyone’s life. But, then, everyone achieves it one day. Everyone reaches a place where he is not accompanied by anyone. It’s his or her grave. Belief in life hereafter is the only thing that gives meaning to this world and life.

In the mainstream economics, utility (satisfaction) is assumed to be attained when the person himself/herself consumes the material goods/services which bring satisfaction. Even though, there is room in utility maximization models to incorporate empathy and altruism, but, the models remain neutral and perhaps rightly so as long as their objectives are confined to ‘description’ and ‘prediction’ rather than ‘prescription’.

Islamic economics incorporates ethical values and excludes from the consumption bundle various goods which bring either private loss or welfare loss to the society. Furthermore, the ethical values in Islamic economics are more comprehensive.

Second, Islamic economics brings a long term perspective to the pursuit of self-interest by informing humans about the positive and negative consequences of their actions/choices in the life hereafter.

As per Islam, the tendency to seek worldly pleasures from certain goods/services and actions/behaviors is natural. The test is to nurture one’s conscience and fight these tendencies from growing beyond a certain level. This test is for each person in his/her individual capacity. We cannot completely deny those tendencies. Neither Prophet Muhammad (peace be upon him) nor the pious caliphs (rta) used any means other than moral persuasion to inculcate a parallel righteous behavior alongside these natural tendencies so that they remain mere tendencies, i.e. weak enough to not influence important choices humans make in matters involving moral issues.

Rather than complimenting humans in their animalistic instincts to keep having one-eyed focus on material well-being only, Islam inculcates piousness, kindness, cooperation and communal responsibility in humans. In some instances, Islam guides explicitly to avoid extravagance, lavishness and using certain products and services which harm a human’s ethical existence and well being either individually and/or harm the society in the process.

Economics says that there is a trade-off in every resource use as every resource has alternate uses. One may feel that striving for success in life hereafter would require a drastic trade-off between material pursuits and following Allah’s will. Indeed, if material lust is preferred over Allah’s will, there will be permanent loss in life hereafter, but that does not preclude us from not having the ability to benefit from Allah’s blessings in this world.

Islam does not discourage seeking Allah’s bounty in the world. One prayer in Quran reads as follows:

“…But of mankind there are some who say: “Our Lord! Give us (Your Bounties) in this world!” and for such there will be no portion in the Hereafter. And of them there are some who say: “Our Lord! Give us in this world that which is good and in the Hereafter that which is good…”

(Al-Baqarah: Verse 200-201)

In economics terminology, Islam does not ask us to have a corner solution when the two goods in question are ‘worldly benefits’ and ‘investment for life hereafter benefits’. Islam does not require us to completely abstain from blessings of this world, but to have a balanced life and a balanced composition of the two goods mentioned above.

About Salman Ahmed Shaikh

PhD Economics, National University of Malaysia. Assistant Professor of Economics and Finance. Author, Researcher, Teacher and Consultant. He can be contacted at:
This entry was posted in Articles on Islamic Economics and tagged , , , , . Bookmark the permalink.

2 Responses to Islam and Welfare Economics

  1. Yes, Islam is a complete way of life. Thank you for sharing this with us. May Allah reward you abundantly Brother.


  2. Mubeen says:

    Good article dear. Jazakallah.


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