Paper Title:    Constituting an Islamic Social Welfare Function: An Exploration through Islamic Moral Economy

Author:          Prof. Mehmet Asutay and Prof. Isa Yilmaz

Publisher:      International Journal of Islamic and Middle Eastern Finance and Management, 14(3), 524 – 540.

The authors state that their study aims to theoretically explore and examine the possibility of developing an Islamic social welfare function (ISWF) within the Islamic moral economy (IME) frame by going beyond the traditional Fiqhi approach.

The noted authors explain that the main contribution of this study is to present a model in which juristic and moralist positions are endogenized and augmented to constitute Islamic social welfare function.

The authors argue that in mainstream economics, the efficiency of the market is taken as given. Prices are assumed to precisely reflect individuals’ desires and constrain their choices. No substantial morality is involved in the model – except voluntarily selected moral considerations – as all movements across institutions are left to the mercy of the price mechanism to be just, equal and efficient.

The authors argue that the four types of social welfare functions, namely, Bergson (1954), Samuelson (1947), Harsanyi (1955), Arrow (1963) and Rawls (1972), under neoclassical economics are all derived from the Western ontology; hence, rationality, a liberal–secular world view, capitalistic ideals, unconstrained individual freedom and self-maximizing behaviour constitute the epistemological bases of these social welfare functions.

The authors contend that the adaption of consequentialism (the doctrine that the morality of an action is to be judged by its consequences as well as its intentional limits) suggested by the IME adds an orientation towards substance for the ISWF.

However, it must be cautioned that even Benthamite approach uses pleasure and pain calculus. The consequences in the Islamic framework encompass consequences in both this life and life hereafter. Furthermore, consequences in this world would also take into account responsibility and welfare in broader sense as compared to the individualistic utilitarian framework.   

The authors opine that the moral aspect, as a parameter for rightfulness, complements the Fiqhi base with an examination of the entire decision-making process. They give the example of Islamic finance industry. The authors think that it has many operations that are not in conflict with the textual understanding of economic verses of Qur’an, but they do not conform well to the spirit of Islam in terms of their substance and consequences.

Therefore, something that is halal from the Fiqhi stand point may not be put into the social preference ordering or should not be preferred to another activity that is more in the spirit of Islam.

The authors think that the amalgamation of individual preferences into a social preference ordering becomes possible because, with the assumption of homo Islamicus, the application of moral filtering eliminates the heterogeneity of individuals’ orderings. This creates an environment where differences in individual orderings are minimized and every ordering does not contradict the others.

As a result, both the individual preference orderings and the subsequent social preference ordering work in harmony with the understanding of the Islam moral economy.

However, it is not understandable that can all the heterogeneity in preferences be assumed away like this. Arrow’s Impossibility Theorem implies that plausible and desirable features of a social decision mechanism are inconsistent with democracy and need dictatorship.

In the Islamic framework, this dictator is replaced by Islamic precepts. This satisfies a thinking mind in Islamic paradigm, but, to convince universality of the argument, there is still a need to clear apprehensions. Godly directives are also understood and perceived on earth by people.

Some Fiqh based understandings of Islamic morality may not be seen similarly in non-Muslim majority societies. Even within Islamic scholarship, there are differing views regarding specific details of women rights, minority rights, mode of political governance and mode of transfer of political authority, for instance. Some orthodox understanding on these issues is not seen unproblematic outside of Islamic orthodox scholarship.

Finally, there is need to show and transform empirical evidence as well rather than quoting ideal proverbs alone. We must avoid comparing ideals of one stream of thought with practice of the other. By and large, other than income inequality, economic problems like poverty, deprivation of basic freedoms and lack of basic necessities is largely a Muslim world problem.