Articles on Islamic Economics

Islamic Economics and Behavioral Studies of Religious Agents

Salman Ahmed Shaikh

There are two basic contents of religion, the beliefs and the other is practices. For the belief part, commonly shared history, archaeology and science also provides sufficient hints for one to rationally decide and keep the belief steadfastly. The practices also make a person more responsible with afterlife accountability and incentives. Nevertheless, the rational merits of religious practices and practical principles are not the sole thesis and set of arguments that the religion uses to appear convincing. The worldview of Islam first and foremost invites a rational human being to think about the deeper meaning and purpose of his life and take heed from established history and science to decide about what to believe in.

Along with a distinct worldview, religion of Islam is a set of prescribed rules than just philosophical and scientific description of human beings and nature. It demands sincere subservience to Allah. Faith cannot be admissible as a sincere religious behavior if it is only based on material expectations of this life.

The worldview of Islam does not relegate a human to be servant of any creation except to the only true Creator. However, it does not ask human beings to use the authority and live their lives the way they want in every matter of life and accept religion as a product and give it some place in time and money allocation. If religion is just a product, then, its use, utility and purpose ends with a person’s life. However, Islam provides a code of life in which even the pursuit of material sustenance can be worship if the believer does it with acknowledging his true role and place in this world.

Indeed, studies in primary-data based religious choices or economic choices by religious persons can explain differences in social and economic choices between religious and non-religious groups, but measuring both the religiosity and its causal effect on behavior is difficult to establish. Furthermore, it is only a Godly endeavor to truly judge about religiosity.

Stated preferences are always a very weak method of finding motivations behind actions where the question of ethics is involved. Behavioral economics confirms through empirical evidence that people tend to be overconfident. They have their personal biases which make people consider themselves more righteous than they really maybe. It is the compliance to religion that makes a person religious and not his performance determining the effectiveness of religion.

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 economic 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. Gregory 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 ideal visions are at the periphery rather than at the center of the field.

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 deeper meaning of life and purpose of human existence.

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