My article with the title above is due to be published in the next issue of the American Journal of Economics and Sociology (2019). This was written at the invitation of the editor Clifford Cobb, as an introduction to Islamic Economics for a secular audience. The Paper explains how modern economics is deeply flawed because it ignores the heart and soul of man, and assumes that the best behavior for humans is aligned with short-sighted greed. Islam provides a radically different view, showing how generosity, cooperation, and overcoming the pursuit of desires leads to spiritual progress. Islam seeks to create a society where individuals can make spiritual progress and develop the unique and extraordinary capabilities and potentials which every human being is born with. Pre-print – to appear in American Journal of Economics and Sociology, 2019 – is available for view/download at the bottom of this post.
As an excerpt, I am posting Section 2 of the paper, entitled
The Flawed Foundations of Modern Economics
The defeat of Christianity in a battle with science led to an extraordinary respect and reverence for scientific knowledge, sometimes called the “Deification of Science,” in Europe (Olson 1990; Zaman 2015a). This had fatal consequences. Even though all scientific knowledge is inherently uncertain, a concerted effort was made to prove the opposite—that scientific knowledge is not only certain, but it is the only source of certain knowledge. Because of distortions necessary to prove something which was not true, the methodology of science was dramatically misunderstood by the logical positivists. Nonetheless, this philosophy became tremendously popular, because it purported to prove both claims: science is certain, and is the only source of certain knowledge. When this became widely accepted in the early 20th century, modern social sciences were born out of an attempt to gain greater intellectual respectability for the humanities by adopting the methodology of science as it was (mis)understood by the logical positivists. (See “Origins of Western Social Sciences“). This led to a re-formulation of the humanities as “social sciences”—a set of universal laws stripped of their historical, sociological, and institutional context. Eventually, logical positivism collapsed under the weight of mounting evidence of failure on multiple explanatory fronts. However, economists never undertook the exercise of re-building the logical positivist foundations of economic theory. Methodology is treated superficially in textbooks, with the result that most economists continue to believe in the central tenets of logical positivism.
The ideas briefly discussed thus far are strongly in conflict with dominant narratives being told about economics. I have examined these counter-narratives in more detail in Zaman (2009, 2013, 2015a). We can summarize them as follows:
- The dominant understanding of the methodology of science in the early 20th century was based on logical positivism, which became wildly popular for a brief period of glory, before going down in flames in a spectacular crash (see Rise and Fall of Logical Positivism ).
- Modern social sciences were born in early 20th century on the basis of a conscious effort to emulate the methodology of the physical sciences, as mis-understood by the logical positivists. This attempt to mathematicise, quantify, and study general laws of motion in societies, reflected a break from the past, in which the study of social phenomena was more qualitative and historically oriented, aligned with complexities of human behavior. Hodgson (2001: 79-94) discusses the Methodenstreit, or battle of methodologies, in Germany, in which the historical and qualitative school lost to the mathematical and quantitative approach. (see Method or Madness?}
- The foundations of modern economics were laid in 1930s by Lionel Robbins as a science of choices subject to scarcity, replacing earlier conceptions based on human welfare. The new foundations were strongly aligned with positivist misconceptions regarding the methodology of science. Cooter and Rappoport (1984) provide an account of how the misconception of that welfare was not observable (and hence not scientific), led to the definition of “scarcity” by Robbins, which replaced earlier conceptions based on human welfare. (see the Methodology of Modern Economics)
- The collapse of positivism should have led to radical re-consideration of these foundations. This did occur in other areas in the social sciences. However, economists continue to use the same foundations, and continue to believe in central tenets of logical positivism. [see “Is Scientific Methodology Axiomatic ?“A recent survey by Hands (2009) concludes:
So most modern economists generally consider rational choice theory to be a positive, not a normative, theory; endorse the position that normative statements/concepts should be prohibited from scientific economics; and equate normative theories/presuppositions with ethics.
Manicas (1987) and Reuben (1996) provide empirical evidence and arguments for the counter-narrative. The idea that “science” is a special way of knowing the world, which is radically different from other types of human knowledge, continues to be firmly embedded in the Western intellectual tradition. Manicas (1987) argues that the Western conception of “science” itself is mistaken. Removing misconceptions about the nature of science could lead to a thoroughgoing revolution in received theories. In historical context, Reuben (1996) explains how the internal dynamics of the academia, coupled with the emergence of positivism, led to a re-conceptualization of the nature and function of the humanities, reformulated as the social sciences. In particular, Weber’s ( 1956) influential essay led to the attempt to remove the subjectivity associated with normative and action-oriented elements of the social sciences.
The full article is embedded below