Research Paper in Focus

Behavioral Assumptions of Islamic Economics Revisited

Paper Title: Behavioral Assumptions of Islamic Economics Revisited

Author:        Murat Çokgezen and Mohammed Seid Hussen

Publisher:    Turkish Journal of Islamic Economics, 10(1), 2023, 85 – 112.

In this paper, authors opine that Islamic economics literature exclusively attributes pure altruism to Muslims. It contrasts homo economicus with homo-Islamicus. Authors try to show through empirical evidence that giving behaviour is not much different among Muslims and non-Muslim in Europe.

However, few things need to be understood in right perspective. In Islamic economics literature, when homo-economicus is compared against homo-Islamicus, it is not necessarily a comparison of Muslims and non-Muslims. Some Muslim economists have erred in presenting it this way or leave such a perception in the minds of readers through their writing.

Secondly, authors through their empirical evidence cannot claim whether giving is pure or impure. Impure altruism is influenced by reasons like:

  1. Satisfying ego,
  2. Improving social image,
  3. Avoid the awkwardness of saying ‘no’ to a direct approach to contribute in a charitable cause,
  4. Showing off wealth in a socially image-enhancing way without any backlash,
  5. Helping in hope of reciprocity or avoidance from social harm,
  6. Peer pressure, and
  7. Finding warm glow or inner peace.   

In contrast, pure altruism is not motivated by self-interest. It is purely a selfless act. What Islamic economics literature idealizes is pure altruism. Unless we know whether giving is motivated by pure altruism or impure altruism, not much can be said about giving across religious groups.

Secondly, authors admit that the data has limitation and it only records a binary response. It does not allow for measuring the amount of donations or time spent in volunteering. Magnitude in a way could also have been one way of assessing whether the high giving despite meagre resources is reflection of pure or impure altruism.

Thirdly, such data does not allow the measurement of elasticity. Elasticity differences even in the same direction could also have revealed much useful information.

Fourthly, since giving in charity and volunteering is only recorded as a binary response, they both turn out to be complementary. Intuition suggests substitution. Those with less money, but more time could help in volunteering to make it up. Studies in divine economics framework have collected meticulous customized datasets at micro level to study this substitution effect and provided evidence in favour of it.

Fifthly, religiosity measurement is critical and self-stated responses versus a neutral and objective evaluation make a huge difference. Studies in divine economics add third party verification to complement self-stated response with objective and neutral assessment by asking neighbours, relatives and peers. This approach could not be adopted in this study.  

By and large, the results are very much what they should be even if data is improved. Islamic sources of knowledge explain that every human being is born with innate ability to differentiate right from wrong. Universal ethics emanates from that Fitrah and faculty of moral reasoning which is inbuilt into humans. Humans are morally conscious species.

Islamic economics shows that in the two-worldly deterministic justice model, Islamic worldview provides deterministic reward to morally conscious good acts. If this reflects in evidence, it implies that the believing Muslim is cognizant and self-aware of this deterministic justice model. Else, it implies shortcoming on the part of the believing Muslim.    

The results also indirectly provide justification for using integrative methodological framework in Islamic economics rather than trying to build a completely distinctive methodological framework in every aspect of choice and constraints.

The integrative framework takes a moderate stance. It criticizes mainstream economics and its narrow focus. Economics is, but a small part of life and a small problem of man. Mainstream economics has shown it as the only problem and the only dimension of man and life. The integrative approach makes a distinction between economic and non-economic choices. This approach confines economics to only the economic sphere of life.

It presents homo Islamicus as a human being who desires to live within the norms and rules of his faith. However, the integrative approach appreciates that this human being is not asked to detest life and resources. This human being has economic needs as well as spiritual needs. This approach incorporates pure altruism, pro-social allocation of resources and moral imperatives in the choice set as the governing framework. Thus, it allows analytical and descriptive studies using mainstream tools as far as they can be useful in analysing and describing economic behaviour. 

The integrative framework is useful for descriptive studies about the economic behaviour of actual human beings making economic decisions in markets. This framework aptly separates economic and non-economic decisions. This distinction does not necessarily depend on the type of resource, i.e. economic and non-economic, but on objective, i.e. economic versus non-economic (spiritual, pro-social, pure altruism, etc.).

However, in some cases, the allocation of resources could be driven by pure spiritual stimuli, i.e. spending on Hajj travel. However, to fulfil this spiritual need, some economic goods will be purchased from the markets. All else the same, one would prefer to economize on airfare, accommodation and food. For instance, if an online app delivers the same airline ticket, hotel room or food brand more cheaply than the other, then it would be chosen while one is undergoing the Hajj journey. 

In some other cases, the allocation of resource driven by spiritual stimuli might not involve buying an economic good, such as a donation. In that case, avoiding such non-economic, but real and significant decisions outside of economics framework is a useful separation for analytical clarity and tractability.

Most definitely, if that framework is adopted in the Islamic economics framework, more constraints can be added to incorporate Islamic values and norms. For instance, in the production set, Haram goods will be excluded. In factor returns, fixed compensation to money capital in the form of Riba will be excluded. In the cost function, investable resources set aside for Zakat, Sadqat and Waqf will be deducted to have a measure of investible resources using which factors of production can be employed.

The integrative framework will not allow economics to suggest normative values. The job of economics would be limited to explain the economic behaviour in the marketplace. In the integrative framework, self-less behaviour would not be treated as irrelevant, irrational or unreal. At the same time, this integrative framework also does not model human economic behaviour by being unnecessarily rigid about potential economic choices made by humans within the ethical limits. It avoids the other extreme view that humans will have no regard for their self-interest whatsoever. Islamic teachings discourage the unrestrained pursuit of self-interest. However, Islamic teachings allow flexibility within the Halal choice set.

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