Whereas conventional economics takes the nature of man as fixed and exogenous, Islamic teachings consider humans to simultaneously possess the potential for being better than angels and also for being worse than animals. Given this dual nature of man, the focus of Islamic teachings is to invite towards the good, and to discourage and prevent the evil. The focus is to try to transform human beings so that they become kind, compassionate, cooperative and generous, instead of acting on their base instincts of greed and competition. For more details in this connection, see Spirituality and Development.
The following ABSTRACT of proposed paper submitted for consideration for the 12th ICIEF at Ummul-Qura University, 10-11 Feb 2019, Mecca, Saudi Arabia outlines a methodology for working on transformation of human beings towards the good.
All social sciences consist of three distinct dimensions. The first is a positive description of human realities. The second is a normative description of an ideal state of affairs. The third is a prescription of what needs to be done to transform the current state to the ideal state. Conventional economics describes humans as being homo economicus, motivated solely by the desire to maximize pleasures obtained by consumption (of goods and services). The ideal state of affairs is for all people to be able to satisfy all desires, but this is not possible due to scarcity. The transformative strategy is economic growth – we increase the amount of production in order to be able to remove scarcity and achieve plenitude. The pursuit of economic growth at all costs, prescribed by conventional economic theory, has caused massive economic injustice, and put the future of mankind in peril, by destroying planetary resources and human communities in the mad rush for growth.
Islam differs from conventional economics in all three dimensions. The description of human beings is substantially more complex, and closer to realities of human behavior. Humans have a wide variety of different goals, and they have conflicting desires and motivations. The human heart is a battleground between the forces of good and evil. The human being has been give the capabilities for excellence in both directions, for the greatest good as well as the greatest evil. The ideal state to strive for has been described theoretically in the Quran and Hadeeth, and the perfect model for behavior has been sent to us in the form of our Prophet Mohammad SAW. The strategy for transformation of human beings is Tazkiya, or purification of the heart from idle desires.
Conventional economic theory takes the nature and desires of man as exogenously given, and works on producing goods to satisfy all desires. Islam works on changing the hearts of men to purify them of the greed and competition for worldly goods, and replace these by the higher norms of cooperation and generosity. True richness is the contentment of the heart, which comes from abundance thinking, rather than worrying about scarcity. The Prophet Mohammad SAW created a revolution in history, transforming ignorant and backwards Arabs to become leaders of the world, and to launch a civilization which enlightened the world for a thousand years. Today, the central strategy of an Islamic approach to economics must similarly be to work on the hearts of men, instead of on the production of wealth.
OUTLINE of Proposed Paper:
Conventional Economics is wrong in all three dimensions.
As a DESCRIPTION of human behavior, homo economicus fails miserably. As behavioral economists have discovered, actual human behavior is dramatically different from the predictions made by economists — see “Behavioral Versus Neoclassical Economics” or “Homo Economicus: Cold, Calculating, and Callous” for the contrast between reality and economic theory.
As a normative theory, the idea that everyone should seek to maximize the pleasure obtained from a lifetime of consumption is dramatically flawed. Seeking material comforts only brings short-term pleasure, but does not lead to long term happiness. See my earlier post on The Coca-Cola Theory of Happiness — even though a drink of coca cola may bring a lot of pleasure to a hot and thirsty man, keeping the referigator stocked with cold drinks will not bring him a lifetime of happiness. Deeper study shows that long term welfare and happiness is strongly dependent on cultivation of gratitude, compassion, and other characteristics and qualities encouraged by Islamic teachings.
As a transformative theory, the idea that growth will remove scarcity is exceedingly foolish. As we fulfill desires, they increase. Furthermore, people seek to have higher standards than their neighbors, in order to feel happy. This creates a rat race where everybody spends huge amounts of time and effort trying to achieve higher standards of living, but nobody feels happier as a result — the Easterlin Paradox: Can Money Buy Happiness?. Islam teaches us if we give someone a valley full of gold, he will desire another one. Nothing will fill the belly of man except the dust of the grave. Islam offers the solution that we should NOT fulfill our idle desires, and control our Nafs. Instead, we should learn contentment of the heart, which is the true wealth.
Islamic Economics Offers a Superior Alternative in All Three Dimensions
As a descriptive theory, Islam provides us with a rich description of the complexities of human behavior. The human heart is a battleground between good and evil, and the human being has the capacity to be higher than the angles and also the capacity to be worse than the beasts. This matches with experimental evidence and also with our personal observations — human beings display cooperation and generosity, along with the selfishness and greed assumed by economics. Islam provides a far more accurate match to the observations of behavioral and experimental economics, giving us a better descriptive theory.
As a normative theory, Islam is far superior to conventional economics. Economics suggest that the sole purpose of life is maximization of pleasure obtained from the utiltiy of consumption. Islam teaches us that this pursuit of material goods and worldly pleasure is attractive to the hearts of men, but this is an illusion. Real satisfaction comes from higher pursuits, and cultivation of character traits like gratitude towards Allah for His countless gifts and blessings. The path to everlasting pleasure, both in this world and the next involves learning Tawakkul or Trust in God, cultivating Contentment, and learning Taqwa.
As a transformative theory, Islamics demonstrated their power by catapulting the backwards and ignorant Arabs to world leadership positions, and by launching a civilization that educated the world for a thousand years. These teachings still retain their power to change our hearts and to change the world — see Our Prophet SAW as a Guide for Revolutionary Change or Modern Miracles of Mohammad SAW. Unfortunately, as prophesied, Islam has become a stranger to the Muslims. Today the Muslims no longer believe in the power of Islam to create a revolution — instead, they think that we must rely on Western teachings in order to make progress. For a more detailed explanation, see The Modern Mu’tazila
To conclude — in all three dimensions, modern economics is seriously wrong, while in all three dimensions, Islamic economics provides a dramatically superior alternative. Sad to say, Muslims have been so impressed with the West that they have accepted Western economic theory as superior. Whenever they saw a conflict between Western economics and the Quran, they re-interpreted the Quran instead of rejecting the Western theories. As a result, they have been trying to create an Islamic economic based on Western foundational principles of scarcity, greed, and competition — see “The Crisis in Islamic Economics“. What we need to do instead is to build directly on Islamic foundations based on the abundance of the provision by Allah leading to generosity and cooperation. For further explanations, see The Spiritual Obstacle to Genuine Islamic Economics, and Questioning All of Economic Theory?