Salman Ahmed Shaikh
For recognition as a distinct field in economic inquiry, any school of economic thought has to have a distinction in methodology, offer positive explanation of an economic phenomenon or propose unique policy suggestions on recurrent and important economic issues. Towards that end, the discipline also has to have a sound and coherent theoretical base.
Islamic principles and philosophy of social system are part of Islamic doctrine. Islamic economics is part of Islamic social system. It is not a distinct field of conventional economic inquiry because it has a distinct paradigm of its own which is based on Islamic worldview. Its methodological base is also different with Quran and teachings of Prophet Muhammad (pbuh) as the guiding sources of knowledge.
Islamic economics can admit micro foundations as description of human behavior in economic way of life; however, the systems, institutions and policy making offered by Islamic economics cannot take human behavior as a rule, but only as a guide. Islamic economics cannot be just description of animalistic pursuit of materialism. Whenever Islamic principles guide choices, the emphasis is not on choosing the specific actions and leaving no other choice for the agent. The reason of that guidance is to create the boundary of permissible ethical and social choices that avoid harming self-interest in both short run and long run for self and for the society.
Most of the description of human economic behavior in mainstream economics is trivial at best. Mankiw once wrote in a widely used textbook ‘people react to incentives, rest is commentary’. Islamic economics cannot confine itself to commentary on material pursuits alone. In mainstream economics, the important issues of equity, welfare, equitable distribution and institutions that can ensure these are at the periphery rather than at the center.
That is where; Islamic economics has something distinctive to offer. Islam as a comprehensive doctrine not only offers basis of a credible social contract and institutions that address issues of welfare and equity effectively, but it also defines the purpose of human existence which gives deeper meaning to life.