A great number of empirical studies now challenge the position of conceptualising human behaviour only in the framework of a rational, utility-maximizing homo-economicus. Yet, this framework is used for the purpose of simplicity and tractability in situations where abstraction does not result in major loss of focus and information at hand.
Some of the Islamic principles and institutions can be integrated in the mainstream economics framework, especially in research studies where the objective is to understand and describe reality rather than persuasion and idealization.
Recent evidence in behavioral finance and consumer psychology points to the fact that consumer information processing capabilities are limited and prone to error. Alias paradox and Ellsberg paradox are good examples of this phenomenon. Furthermore, ‘Ultimatum Game’ reflects the fact that people tend to look at their choice outcomes relatively. Prisoner’s Dilemma highlights the fact that choices by each player in a self-centric way are not necessarily going to be best for them either individually or collectively.
Famine, death from hunger and debt enslavement is the fact of life for the half of the people on earth not because that overall, the societies have scarce resources, but because the distribution of resources is inequitable as empirically proven by Nobel Laureate Amartya Sen and noted by Thomas Piketty in his recent book ‘Capital in the Twenty First Century’.
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.
Human welfare in Islamic worldview encompasses economic welfare, but comprises much more than that. The achievement of human welfare is sought in both aspects of human life, i.e. worldly life and eternal life hereafter.
It is an empirical observation that people desire to have smooth consumption throughout their lifetimes. Lifecycle consumption hypothesis (LCH) and permanent income hypothesis (PIH) try to explain that in micro-founded framework. Both negate the Keynes assertion that average propensity to consume (APC) falls as income rises. Some micro-economic evidence is also broadly consistent with LCH and PIH, at least in advanced economies.
The idea of material progress and well being enabling the people to forget fear and religion and Question of ‘why we exist’, has failed. Ignoring the purpose of existence and trying to replace it with material self pursuit does not and has not solved the fundamental human quest of ‘why we exist’.
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.