Islam and Scientific Economics: In the Pursuit of a New Paradigm

202 Pages·2014·3.226 MB·English

by  Hasan Gürak

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a
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Hasan Gürak
Hasan Gürak
Islam and “Scientific” Economics
In an Islamic society, it is ethics that dominates and determines all behavior, including s Islam and “Scientific”
c
economic behavior. The Holy Koran emerges as the main source of all economic beha- i
m
vior and practices which are subject to the commands of Allah as stated in the Koran.
Since Islam is a universal religion, the Islamic economic paradigm with its “scientific” o
n Economics
Islamic economic theories has to be comprehensive as well as perfect in the sense of o
fairness, ethical values and fruitfulness. A universal Islamic economic system ought c
E
to have universally applicable economic laws acceptable by both, the Muslim and the
”
non-Muslim world – meaning that when the word Islamic is taken out of the equation; c In the Pursuit of a New Paradigm
it should appeal to all societies and countries equally, regardless of their religious fi
persuasion. The question now is; do Islamic economics offer such “scientific” economic ti
theories? Surprisingly, there were no such theories at all. In fact, there was not even n
e
a theory of interest, the most frequently referred to subject in Islamic economics. This i
c
appeared to be a serious omission. The Holy sources may be more than sufficient for S
Muslims, but what about non-Muslims? Isn’t it justified to expect Islamic “scientific” “

economic models and theories that are applicable to or able to guide non-Muslims? d
n
a

m
The Author
a
Hasan Gürak studied in Germany, England and Sweden and obtained his doctoral degree l
at the University of Istanbul. Presently he is engaged in academic research in the field Is
known as ‘Heterodox Economics’, aiming to develop alternative theories and analyses in
mainstream economics.

ISBN 978-3-631-65492-7 www.peterlang.com
265492_Gürak_AM A5HC PLA research new.indd 1 16.06.14 12:29
k
a
r
ü
G
Hasan Gürak
Hasan Gürak
Islam and “Scientific” Economics
In an Islamic society, it is ethics that dominates and determines all behavior, including s Islam and “Scientific”
c
economic behavior. The Holy Koran emerges as the main source of all economic beha- i
m
vior and practices which are subject to the commands of Allah as stated in the Koran.
Since Islam is a universal religion, the Islamic economic paradigm with its “scientific” o
n Economics
Islamic economic theories has to be comprehensive as well as perfect in the sense of o
fairness, ethical values and fruitfulness. A universal Islamic economic system ought c
E
to have universally applicable economic laws acceptable by both, the Muslim and the
”
non-Muslim world – meaning that when the word Islamic is taken out of the equation; c In the Pursuit of a New Paradigm
it should appeal to all societies and countries equally, regardless of their religious fi
persuasion. The question now is; do Islamic economics offer such “scientific” economic ti
theories? Surprisingly, there were no such theories at all. In fact, there was not even n
e
a theory of interest, the most frequently referred to subject in Islamic economics. This i
c
appeared to be a serious omission. The Holy sources may be more than sufficient for S
Muslims, but what about non-Muslims? Isn’t it justified to expect Islamic “scientific” “

economic models and theories that are applicable to or able to guide non-Muslims? d
n
a

m
The Author
a
Hasan Gürak studied in Germany, England and Sweden and obtained his doctoral degree l
at the University of Istanbul. Presently he is engaged in academic research in the field Is
known as ‘Heterodox Economics’, aiming to develop alternative theories and analyses in
mainstream economics.

www.peterlang.com
265492_Gürak_AM A5HC PLA research new.indd 1 16.06.14 12:29
Islam and “Scientific” Economics

Hasan Gürak

Islam and “Scientific” Economics

In the Pursuit of a New Paradigm
Bibliographic Information published by the Deutsche Nationalbibliothek
The Deutsche Nationalbibliothek lists this publication in the Deutsche
Nationalbibliografie; detailed bibliographic data is available in the internet
at http://dnb.d-nb.de.

Library of Congress Cataloging-in-Publication Data
Gürak, Hasan.
Islam and scientific economics : in the pursuit of a new paradigm /
Hasan Gürak. – 1 [edition].
pages cm
ISBN 978-3-631-65492-7
1. Islam–Economic aspects. 2. Economics–Religious aspects–Islam.
3. Economic development–Religious aspects–Islam. I. Title.
BP173.75.G87 2014
330.1–dc23
2014023710

Cover illustration: © Ebru Erman

ISBN 978-3-631-65492-7 (Print)
E-ISBN 978-3-653-04766-0 (E-Book)
DOI 10.3726/978-3-653-04766-0
© Peter Lang GmbH
Internationaler Verlag der Wissenschaften
Frankfurt am Main 2014
All rights reserved.
PL Academic Research is an Imprint of Peter Lang GmbH.
Peter Lang – Frankfurt am Main ∙ Bern ∙ Bruxelles ∙ New York ∙
Oxford ∙ Warszawa ∙ Wien
All parts of this publication are protected by copyright. Any
utilisation outside the strict limits of the copyright law, without
the permission of the publisher, is forbidden and liable to
prosecution. This applies in particular to reproductions,
translations, microfilming, and storage and processing in
electronic retrieval systems.
This publication has been peer reviewed.
www.peterlang.com
Preface
The purpose of the book is to present the main Islamic concepts and the “scien-
tific” foundations of “Islamic economics”.
Why “scientific Islamic economics”?
Presumably the subject “Islamic economics” is of interest to any economist.
To be more specific, subjects such as Islamic Banking and the interest-free eco-
nomic system are rather intriguing for the pluralist minded scholar. Having had
a Western “style” economics education in Sweden but, nevertheless, as a hard
line antagonist and critic of mainstream economic theories, I could not over-
come my intellectual curiosity to find out what really is different in Islamic eco-
nomics from the Western system and to what extent it differs. However, after a
short while, and to my surprise, I found out that Islamic “scientific” economic
theories I was looking for, did not actually exist. Not even a universal Islamic
economic theory on the subject of “interest” applicable to all nations, Muslim or
non-Muslim, has been developed. Yet, “interest” is probably the most frequently
discussed subject in Islamic economics. All ideas or discussions extant on the
subject of interest in the Islamic economic system indicates that it was founded
on the four Suras of the Holy Book, the Koran, or on the Sunnahs, which are the
sayings and practices of the Prophet Mohammed. There appear not to be any
“scientific” explanations or analyses.
The Holy sources may be more than sufficient for Muslims but what about
non-Muslims? Is it unfair to expect that Islamic “scientific” economic theories
should be applicable to, or able to guide non-Muslims, as well?
The absence of any “scientific” Islamic economic theories led me to change my
primary aim, one of collating and editing the relevant Islamic “scientific” works,
to one of developing a personal and critical evaluation of the present state of
Islamic economics. So my initial purpose had to be changed from one of “un-
derstanding” the available literature on Islamic “scientific” economics, to one of
analyzing and commenting, and even attempting to develop “new” theories in
accordance with Islamic values. The fruits of my labors have resulted in this book.
There is no individual, institution or academic unit to whom I owe a debt of
gratitude to; except for those researchers from whose works I have benefitted in
the writing of this book. This was a great disappointment to me because I had
high hopes that my “conservative” or “liberal” minded colleagues would show
5
some interest in this work and would contribute by sharing their views. But my
hopes were in vain! All the ideas presented in the book whether they are benefi-
cial or deficient are solely my own ideas and contributions.
The only person I owe gratitude to is “Hakim John Lee” from Bodrum-
Turgutreis who not only contributed by correcting my mistakes in English but
also, now and then, suggested some valuable remarks which should, in fact, have
come from my colleagues in the first place. Thank you Hakim!
Finally: I would ask the reader to note that almost all translations from Tur-
kish to English were made by me. I do not claim to be a professional translator.
As a result there may be, in fact, there must be errors for which I feel obliged to
apologize to the authors of the original texts. The intention was sincere, though
the outcome may not be in exact compliance with their original meaning.
Hasan Gürak
6
Table of Contents
Introduction .............................................................................................................13
On the State of Knowledge ..................................................................................14
On the “Creative” Mental Skills of Man .............................................................17
On the “New Knowledge” on Economics ..........................................................18
The Content and the Method ...............................................................................18
Chapter-1 Revaluation of Islamic Economics-1
Developing Islamic Economic Theories ........................................................21
Introduction ..........................................................................................................23
Islamic Economic Theories in Retrospect ..........................................................24
Islam and Economic Knowledge .........................................................................25
Influence of Islamic Scholars on Economic Issues ............................................27
The difference between Islamic economics and the “Others” .........................29
Islamic economics-reconsidered .........................................................................32
Islamic Economics .................................................................................................33
The lack of a scientific dimension .......................................................................35
The Verses of the Koran & the Hadith about “Alternative” Economics .........41
Concluding Remarks ............................................................................................45
Chapter-2 Revaluation of Islamic Economics-2
Western Scientific Economic Theories Are They
A Proper Source of Inspiration for Islamic Economics? ..............................49
Some Opinions on Islamic Economics ...............................................................51
The Concept of Islamic economics .....................................................................51
How Does One Proceed? ......................................................................................56
Some Features of the Mainstream Theory .........................................................57
The Nature of the Neoclassical Theories .......................................................58
Do Assumptions have to be “Utopian”? ........................................................58
The Historical Dimension ...............................................................................60
A Fictitious Case: The State of Equilibrium ..................................................61
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Utility .................................................................................................................61
Homo Economicus vs. Normal Man .............................................................62
What is the Attraction of the Neoclassical Theories? .......................................63
A Brief Glance at the Past ................................................................................64
“Normative” Neoclassical Theories ................................................................66
Positive Economics vs. Normative Economics .............................................66
On scientific (!) mainstream economics ............................................................67
Chapter-3 Revaluation of Islamic Economics-3
Islam, Science and the “Absolute Truth” .......................................................73
Introduction ...........................................................................................................75
The Positive Sciences – Economics & “Absolute Truth” ...................................75
“Natural” Sciences and the “Absolute Truth” ................................................76
Social Sciences and the “Absolute truth” .......................................................77
The Islamic Faith and the “Absolute Truth” .......................................................77
Islamic Economics and the Notion of “Absolute Truth” .............................78
Chapter-4 An Islamic Value & Price Theory
An alternative approach based on mental labor
and technological change ....................................................................................81
Introduction ...........................................................................................................83
The Hypothesis .................................................................................................83
The analysis is “Islamic” because ....................................................................84
Why Price Theory? ................................................................................................86
Towards a New Mindset ..................................................................................87
A Brief Historical Review .....................................................................................88
The Original Sources of Value: Nature and Laborer .........................................89
The Labor-power ...................................................................................................90
“Creative” Mental Labor and Value Generation ................................................91
Value Generation - A Simple Model ..............................................................91
Different Qualities of Mental Labor ...............................................................95
Value-Price Relation..............................................................................................96
Relative Prices ........................................................................................................97
Relative Prices in the Service Sector ................................................................100
Commodity Sector Price Formation ................................................................101
Transformation of Values into Prices ...............................................................101
A Case of “Barter-Exchange” .......................................................................101
8