Tag: Utility Maximization

Questions in Islamic Economics: Connecting Spiritual Growth to Economic Theory

Many professionals today experience a dilemma where they must make a choice between being good humans and being good at their job. They are left to wonder how the principles of love, generosity, fairness, reciprocity, and trust that they know to be true about life in general, do not apply at work. Some resort to the unfortunate conclusion that cold selfish behaviour is “natural” for human beings in economic situations. This is false. One of the prime reasons for moral listlessness at the workplace lies buried in mainstream economic theory.

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Methodological Framework for Studying Consumption in Islamic Economics

There is considerable debate in Islamic economics literature on what shall be the correct response and attitude towards mainstream economics methodology. There are three varied responses among Islamic economists regarding the issue. The first response is to use the methodology of mainstream economics in Islamic economics as is. The second response is to modify it according to the needs and the context of Islamic framework. The third response is to discard it altogether and devise a new methodological framework from scratch.

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Economics and Pro-Social Behaviour

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.

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Limitations of Mainstream Consumer Theory in Economics

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.

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