Economics and Business

Economics and Business

Maximization Postulates and Their Efficacy for Islamic Economics

Abstract : This paper examines the nature and role of maximization postulates concerning profit and utility in the mainstream price theory formation, from a methodological perspective. Mainstream economics retains these postulates, despite much criticism, mainly for two reasons. Firstly, they help establish cause-effect linkages among economic variables and markets. In that they greatly facilitate predictions and their empirical verification over a wide field of inquiry. Secondly, no other behavioral rule has so far been established that gives equally valid, if not superior, results over such range. It is argued that the postulates are required in Islamic economics as well for the same reasons. Maximization, per se, is not un-Islamic: what is maximized, how and for what purpose are the real issues to investigate before passing judgment. Contrary to the current position in the literature, we find it preferable to include moral values and social considerations of Islam in the assumptions of economic theorems, rather than attempting to include them in the objective elements of the models, until Islamic economics evolves as an independent subject. For maximization is a mathematical concept, and cannot fruitfully accommodate what cannot somehow be measured.

Islamic Banking

Mervyn K. Lewis and Latifa M. Algaoud, Cheltenham, UK: Edward Elgar, 2001. 274 pages.

Islamic Banking is an outstanding example of collaboration among Muslim and non-Muslim scholars interested in integrating “Western-based literature with that developed in the Islamic tradition.” Stating that Islamic banking, although widespread, remains “poorly understood” in the Muslim world and an “enigma” in the West, the authors seek to clarify many matters. The book’s main themes are Christian and Islamic positions on usury/riba’ (chapter 8); the foundations (chapters 2 and 3), theories (chapter 5), application (chapters 5, 6, 7, and 9), and progress (chapters 1 and 9) of Islamic banking; and an analysis of Islamic banking in light of current theories of financial intermediation (chapter 4) and corporate governance (chapter 7).

The Construction of Knowledge in Islamic Civilization: Qudama b. Ja`far and His Kitab al-Kharaj wa-Sina`at al-Kitabah

Paul L. Heck, Leiden: E. J. Brill, 2002. 243 pages.

Through the lens of genre, Heck examines Kitab al-Kharaj wa Sina`at al-Kitabah (“The Book of the Land-Tax and the Craft of Writing/ Secretaryship”), a work on Islamic administration composed in Baghdad in the early fourth/tenth century by the prominent secretary Qudamah ibn Ja`far (d. 337/948). His analysis of Qudamah’s manual, which belongs to a body of texts that emerged in the late third/ninth century and focused primarily on the concerns of state officials, proceeds by breaking it into constituent parts and considering each one individually in relation to earlier and contemporary works in related genres. The result is a detailed appreciation for the work’s characteristics and relative merits; showing how one author constructed human knowledge; how he articulated the relationship between knowledge, religion, and the `Abbasid state; and how this portrayal differed from other contemporary schemes.

The Book of Revenue Abu `Ubayd al-Qasim ibn Sallam

rans. Imran A. K. Nyazee, Reading, UK: Garnet Pub. Ltd. and Doha, Qatar: The Center for Muslim Contribution to Civilization, 2003. 608 pages.

With the revival of Islamic finance, the translation of this seminal work on fiscal matters is a significant landmark. While such Islamic thinkers as Baqir al-Sadr, Abu’l A`la al-Mawdudi, and others were formulating the thinking that eventually engendered Islamic banks and finance houses, most of the classical reference works in Arabic remained obscure and unpublished. Over the past 50 years, however, much has changed.

Prof. Zubair wins IDB’s Islamic economics prize

Dear Prof. Zubair                                                           

Assalamu Alaikum Wa Rehmatullahi Wa Barakatuhu

I pray to Allah that you will be in the best of health and happiness.

Our heartiest congratulations for the award of the Islamic Development Bank for the year 1430 H (2009) in Islamic Economics.  May Allah bless you and help you to make even more contribution in this field, especially the philosophy of the Islamic economics, its system and its major institutions and tools, which is very much needed by both Muslims and non Muslims.

Please also convey our congratulations to your family and our mutual friends.

The Islamic Philosophy of Labor and Crafts: The View of the Ikhwan al-Safa’, Isfahani, and Ibn Khaldun

Early Islamic economic philosophy adopted or adapted the ancient economic philosophical legacy; particularly, from Bryson, whose work was available in the tenth-century in anonymous Arabic translations. These philosophical texts influenced Muslim educational and economic monographs, 1 especially Persian works on slaves, servants, and merchants.2 In those days, free people could not easily perform the menial tasks of the family and the state. The family is a microcosm of the social function of the state and, therefore, operates on the same principles as the state. Since servants are vital to the smooth functioning of the family and society, masters should be grateful to God for their labor and always treat them with kindness and benevolence. Masters should know that their servants suffer exhaustion and fatigue, just as they do. Therefore, masters should be just toward them.3

The Time Value of Money Concept in Islamic Finance

Abstract : The time value of money is a basic investment concept and a basic element in the conventional theory of finance. The Shari`ah does not rule out this consideration, for it does not prohibit any increment in a loan given to cover the price of a commodity in any sale contract to be paid at a future date. What is prohibited, however, is making money’s time value an element of any lending relationship that considers it to have a predetermined value. Here, the Shari`ah requires that a loan be due in the same currency in which it was given. The value (i.e., purchasing power) of paper currencies varies due to changes in many variables over which the two parties of a loan contract usually have no control. This study examines possible modus operandi of time valuation according to the Shari`ah’s precepts vis-à-vis the concept of money, and whether any value can be attributed to time while considering money’s value. For this purpose, it investigates the juristic views on such relevant issues as the permissibility of difference between a commodity’s cash and credit prices and an increase and reduction of the loan’s amount in return for early repayment.

Maqasid al-Shari`ah, Maslahah, and Corporate Social Responsibility

Abstract : The doctrine of corporate social responsibility (CSR), which has emerged and developed rapidly as a field of study, is a framework for the role of business in society. It sets standards of behavior to which a company must subscribe in order to impact society in a positive and productive manner while abiding by values that exclude seeking profit at any cost. Despite the many attempts to construe CSR initiatives, it remains open to wide criticism for its inherent problems via-à-vis justification, conceptual clarity, and possible inconsistency. These problems are more acute when it comes to implementing and operationalizing CSR on the ground, especially in a situation that involves trade-offs. This paper offers an instructive understanding of CSR from an Islamic perspective. In particular, the implication of maqasid alShari`ah (the Shari`ah’s objectives) and the application of maslahah (the public good) to CSR are discussed in detail to shed light on how Islam’s holistic and dynamic perception of CSR take into consideration reality and ever-changing circumstances. These principles also provide a better framework that managers can use when faced with potential conflicts arising from the diverse expectations and interests of a corporation’s stakeholders.

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