Notes on Islamic Economics , livre ebook

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Notes On Islamic Economics





THEORIES AND INSTITUTIONS





MONZER KAHF

MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

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MONZERKAHF
Address: 22Marblehead,Irvine,CA92620USA
Email:monzer@kahf.com




Publishedby:MonzerKahf
Feb.2014

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

THISSERIES

PREFACE

ThisisthefirstinaseriesoffourbooksonNotesonIslamic
Economics.Thefirstbookdealswiththefundamentaltheoriesand
institutionsoftheIslamiceconomicsystem.Itattemptstopresenta
completeandcoherentinstitutionalsettingoftheIslamiceconomic
systemwhichputsitatascientificlevelcomparablewithothersystems
andallowsustoderivepoliciesandguidelinesforgradual
transformationofanyeconomyandforadaptingexistinginstitutionsto
thebasicrequirementoftheIslamiceconomicsystem.

Thesecondbookofthisseriesshallfocusonthethirdsector,
thecharitableinstitutionsoftheIslamiceconomicsystem.Itshall
discussthefundamentalprinciplesonwhichtheIslamiccharitable
sectorisfounded.ItwilldiscusstheprinciplesofZakah,Awqafand
InfaqintheIslamiceconomicsystem,theinstitutionstheycreateand
theirhistoricalapplication.Itwillalsodiscussthenecessary
requirementforefficientmanagementofZakahandAwqafin
contemporaryeconomiesandmeansandmethodologiesforfinancing
therevitalizationofdormantAwqafrealestatepropertiesinthe
Muslimsocieties.

BookthreewilltakeuptheissueofIslamicfinanceandbanking.
ItwillpresentthebasicsketchofIslamicfinancefromtheoreticaland
practicalaspects.ItwillfocusonthenewconceptofIslamicfinancial
intermediationandwilldistinguishbetweendepositoryfinancial
intermediaryinstitutionswhichhaveanimportantmonetaryaspectof
theiractivitiesandotherinstitutionswhichconcentrateoninvestment
activities.

BookfourwilldiscusstheIslamicdevelopmenttheoryand
policy.ItwilldealwiththeobjectivesofeconomicpoliciesintheIslamic
economicsystemandtheinstrumentsavailablefortheirachievement.
ItwilllookintothechangesimplicatedbytheIslamiceconomicsystem
intheconceptandapproachestodevelopment.Thisbookwillalso
covertheIslamicapproachtofiscalandmonetarypoliciesaswellas
incomepolicyanddevelopmentalpolicy.

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

InthesefourbooksIdonotintendtorepeatotherwritings.This
seriesisanattempttopresentIslamiceconomicsinanonͲtraditional
waywithanemphasisontheinstitutionalaspectsandstructure.Iwill
dealwiththefundamentalissuesofIslamiceconomicsandfinanceina
realisticyetinnovativemannerwhileobservingfundamentalrelations,
tiesandinspirationfromthebasicsourcesoftheIslamicreligionandits
Shari’ahrulings;theQur’anandtheSunnah.

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

Introduction

Chapter1

Chapter2

Chapter3

Chapter4

Chapter5

Chapter6

Chapter7

Chapter8

Chapter9

Chapter10

Chapter11

Conclusion

TABLEOFCONTENTS

NOTESONISLAMICECONOMICS

THEORIESANDINSTITUTIONS

Page

ix
IslamicEconomics,Whatisitandwhatisit
1
for?
FurtherNotesonDefinitionandMethodology
19
ofIslamicEconomics
TheRoleofValues,EthicsandCulturein
47
Economics
InstitutionalStructureoftheIslamicEconomic
61
System

EconomicRoleofStateinIslam

TheRoleandImportanceofthePrivateSector

93

119

TheDemandSideorConsumerBehaviour
145
Theory

SupplySideorProducerBehaviour

TheInstitutionofMarket

177

211

InstitutionalGuidelinesofMarketRegulation237
Allocationofoutputtofactorsofproduction
259
andtheimplicit
295

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INTRODUCTION

ThisisthefirstbookoftheseriesofNotesonIslamicEconomics.
ItpresentsthebasictheoriesandtheinstitutionalsetupofIslamic
economics.Itcoverschaptersonethrougheleven.Theypresentthe
basicideasandtheoriesofIslamiceconomics.Chaptersoneandtwo
attempttoanswerthequestionsof‘whatisIslamicEconomics’and
‘whyweneedtostudyit’,theyalsodiscussissuesofdefinition,scope,
sourcesofknowledgeandrelevance.
Thethirdchapterdealswiththebasicvaluesandethical
questionsofIslamiceconomicsbothasabranchofscienceandasa
studyoftheIslamiceconomicsystem.Itbrieflystudiesethicalvalues
whichaffecteconomicbehaviourofmenandwomenlikeofefficiency,
performance,selfͲreliance,perfectionandbenevolence.Chapterfour
willdiscussthefundamentalinstitutionalsetupoftheIslamiceconomic
system.ItarguesthattheIslamicinstitutionalsetupisbasedonnine
pillarswhichare:1)Propertyrights,2)Exchangeandcontracts,3)
Economicfreedom,4)Marketstructure,5)Wealthandincome,6)State
oflaw,7)Economicactivityofthestate,8)Internalethicalmonitor,
and9)Mercyandcaring.

Thefollowingtwochaptersaredevotedtothediscussionofthe
positionandplaceofthestateandtheprivatesectorinthesystemand
theinterrelationsbetweenthem.Themainargumentofthesechapters
isthatwhiletheIslamicsystemadoresprivateownershipandeconomic
freedom,itassignsanimportantroletothestate,inallitsbranches,
andchargesitwithimportantfunctionsincludingthemanagementof
publicproperties,includingnaturalresources,whichmaybehuge
undercertaincircumstance.

Islamictheoriesofconsumerbehaviourandproducerbehaviour
arediscussedinchapterssevenandeight.Thebasictheoremofthese
twochaptersisthathumanbeingsarenotonedimensional.They
ratherhaveabenevolentfacetoftheirbehaviourswhichispresent
bothintheconsumersandthefirmsaswell.Theanalysisinthesetwo
chapterstriestotakethisbehaviouralelementintoconsideration.

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

Chapterninerevisitsthemarketanddealswiththestructureof
pricesatthemicrolevel.Itarguesthatthemarketreformsintroduced
bytheProphet,pbuh,himselfwereveryexemplaryinsettingthe
desiredstructureforthemarketonthebasisoffairplayofmarket
forcesofdemandandsupplywithoutelementsofinjusticewhichmay
comefrommonopoly,financialpower,unethicalpracticesbysome
actorsorinsufficientpowerofenforcementofexchangecontracts.At
thesametimetheIslamicmarketstructuredoesnotassumeconditions
ofperfectcompetition.

Thelasttwochaptersaredevotedtodiscussingtheeffectof
marketstructureonthefactorsofproductionandontheallocation
processofresources.Theyalsodiscussregulationsinthemarketand
theirextentandeffect.

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MONZERKAHFͲISLAMICECONOMICS:THEORIESANDINSTITUTIONS

CHAPTERONE
ISLAMICECONOMICS,WHATISITANDWHATISITFOR?

WhatisIslamicEconomics?Doesitexist?Whatisthesubjectof
IslamicEconomics?Thesearethreeintroductoryquestions
understandingthemwillfacilitateourstudyinthefollowinglectures
anddiscussion.

Tobeginattemptingtoanswerthefirstquestionwemustfirst
knowwhatEconomicsitselfis,asabranchofscience,studiesand
researchsinceIslamiceconomicsisalsoeconomicsanyway.

WhatisEconomics?
Economicsisthestudyofhumanbehaviour,actionsand/or
practicesinutilizinglimitedresourcestosatisfyunlimitedwants.Itisa
socialsciencewhichstudieshumanbehaviourindealingwithwealth,
property,resources,incomeandthelike.

Mainobjectivesofanyreligion

Everyreligionisconcernedwithtwomainobjectives;deedand
creed.Everyreligion,fromthebehaviouralangle(thedeed),isfocused
onformulationorreͲformulationofhumanbehaviourtomake
compliantwiththemannerwhichisdesiredandprescribedbyreligion.
Thus,religion,incontrasttoeconomics,dealswiththeholistichuman
behaviour(doanddon’tdo)inutilizingresourcesofallkinds,notonly
materialresources,tosatisfywants,desiresandotherobjectivesin
humanlife.Religionisthereforefocusedonhumanbehaviourinits
totality,itisbroaderthaneconomicsitself.Itdealswiththeuseof
resourcesefficientlyandcoversotheraspectstoothatarenotcovered

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ineconomics.Inthesecondsourceofreligion,theSunnah,the
prophet,pbuh,isreportedtohavesaid:thetwofeetofaservantof
Allahwillnotmove(remainstanding)ontheDayofJudgmentuntilhe
isquestionedabouthislifehowhespentitandabouthisknowledge
howheutilizeditandabouthiswealth/propertyfromwherehe
acquireditandinwhatwayhespentitandabouthisbodyastohow
ﻢﻴِﻓ ِﺄﺴﻳ ِﺔﻣِ ْمﻮﻳ ٍﺪﺒﻋَ ُ
ِهﺮﻤﻋ ﻦﻋَ َ
heuseditَ