Overview On Economics ECS10403 PDF

Overview on Economics ECS10403  Learning Outcomes Explain the definition of Islamic economics, objectives and principles of Islamic economics. Explain the important of developing of Islamic economics  Introduction...

Overview on Economics ECS10403  Learning Outcomes Explain the definition of Islamic economics, objectives and principles of Islamic economics. Explain the important of developing of Islamic economics  Introduction The Economic System Economics is usually defined as the theory of human behavior relating to the production, consumption and distribution of goods and services. Islamic Economics? Manan (1970) has given a simple but very useful definition for Islamic economics, “a societal science which studies the economic problem of the individuals instilled with the morals of Islam”. Ahmad (1992) has defined Islamic economics as “organized efforts to try to comprehend the economic problem and men’s behavior in linking to that problem from an Islamic perspective. It may be pointed out that Islam is not merely a religion but a complete code of life and that human behavior, or more precisely, human economic behavior, is a subset of the Islamic ethical code. Islamic economics can be defined as the part of Islamic ethical code which studies the process of economic, social and moral human behavior in an integrated manner in relation to the production, distribution and consumption of goods and services.  Islamic economics deal with only part of the Islamic ethical code, which is defined primarily in terms of the Quran and the Sunnah (tradion of the Prophet),through ijma (Muslim justice consensus), and ijtihad (an Islamic lawful term denoting an independent reasoning or the comprehensive efforts of a jurist’s intellectual faculty in finding an Islamic explanation for a legal Islamic economics is a process which refers to the study of behavior of producers and consumers. This aspect of Islamic economics becomes particularly relevant when we consider the case of economic development from an Islamic perspective. It presumes that economic values cannot be separated from either social or moral values, as they are in the case of capitalistic and socialist economics It studies human behavior with particular reference to production, distribution and consumption of goods and services (Mannan, 1984)  Features of Islamic economics Islamic economics is considered by its own structures, which make it different from any other form of economics (Boutayeba et al. 2014). The important features of Islamic economics are: Divine-based discipline: Islamic economics is ultimately based on belief and morality, because its guidelines and values represent the teachings of Islam, and because muslims follow the divine guidelines when dealing with economics issues; i.e they obey God wherever and whenever they exercise any type of economic action Ethical: Islamic economics is mainly based on morals and ethics. Economics should not be detached from ethics. This matter is a vital element of the Islamic philosophy of life, because Islam is largely a structure of ethical guidelines from God to humans. Humanistic: Islamic economics is based on heavenly guidance, as pointed out previously, but is equally concerned for human values and welfare. Modest: The essence of Islamic economics is the values of equilibrium and moderation. While, for instance, capitalism places an excessive importance on the individual rather than society, and socialism reverses these priorities, the goal of Islam is to create a balance between society and the individual. It permits both public and private ownership.  The Objective (maqasid) of Islamic economics According to Mohammad and Shahwan (2013), the purposes of Islamic economics should be the guiding principles behind Islamic banking and finance. However, (1979) underlined four important goals of Islamic economics in order for the values and all- inclusive purpose of the Islamic economic system to prevail. These four goals are:  To attain economic welfare within paradigm of the ethical norms of Islam; To maintain justice and universal brotherhood; To achieve equitable circulation of income; To attain freedom of the individual within the framework of social well-being  Philosophically based objectives The philosophically based objectives are those that relate to the internal features of Islamic economics in general and particularly how to focus these features toward its ultimate goals. By familiarizing the aims of Islamic economics, Ahmad (1986) divides the philosophically based objectives into four themes:  Means the matter of accountability of Khilafa humanity as God’s vice-regent or steward. Is the acknowledgement by humanity of the unity Tawhid of God Refers to human awareness Rububiyya that God is provider and sustainer of all creation h Refers to Tazkiyah al purifying of Nafs human personality in the light of God’s guidance through Quran.  Operationally based objectives In the contemporary literature on Islamic economics, al falah has been the operational objective of Islamic economics (Khan 1984; Choudhry 1999). It covers the sphere of human activities for the sake of God and may also be accomplished through fulfillment of the operationally based objectives. These objectives therefore need a tangible valuation process to ensure their effectiveness and accomplishment. As a result, Muslim scholars have also explored different methods of determining the goals of Islamic economics. Basically, operational objectives are those objectives which have measurable, testable outcomes and are directly related to worldly activities (Mohammad and Shahwan 2013) Operationally based objectives Enjoying State Social- Economic- Justice- good and Self-based based based based (inner-self) participatio forbidding n objectives objectives objectives evil based objectives objectives. objectives  Islamic Economic System Principles of Islamic Economic Allah determines Right and Wrong Principles of Uses Principles of Moderation Principle of Justice Economic Freedom  Islamic economic system should principally, first, makes distinction between what is permitted being lawful (Halal) and what is forbidden being unlawful (Haram), also harus, compulsory and makruh. To determine what is permitted or lawful (Halal) and what is forbidden or unlawful (haram) is the soul prerogative of God. God is empowered to pronounce what is right and what is wrong. Allah has made demarcation between lawful and unlawful in the economic sphere and has allowed man to enjoy those are lawful and avoid those things which are unlawful. Allah determines Right and Wrong  Within the bounds of lawful (Halal) and unlawful (Haram) prescribed by Allah and also keeping in view the rules of moderation and prudence, the man has been allowed to make full enjoyment of God’s gifts bestowed on him. Principles of Uses  Islam unequivocally discourages its followers to cross the limits and follow extremes. The Muslims have been called by the Qur’an a middle nation (2:143). Therefore, the principle of moderation carries paramount importance especially in the economic field. This principle is followed by the true believers in the production of wealth as well as in the consumption and spending of wealth. Principles of Moderation  Although earning of wealth through permitted (Halal) means is allowed, yet the piety demands that a Muslim should not become mad after amassing wealth like a greedy materialist. He should exercise restraint and earn wealth to meet his lawful needs. Extra wealth, if at all is earned by him somehow, may be spent in the path of Allah on charity and relief of the poor. Similarly, in the consumption and spending of wealth, the believer is recommended to strike balance avoiding miserliness and extravagance. Principles of Moderation  Islamic principle of justice operates in every sphere of human activity, may it be legal, social, political or economic. Islamic economic system, in fact is based upon the principle of justice which governs all the basic aspects of economy like production, distribution, consumption and exchange. In the sphere of production, Islamic principle of justice ensures that nobody is exploited by the other and that nobody acquires wealth by unjust, unfair, unlawful and fraudulent means. Principle of Justice  Justice in distribution, which is called by various names like economic justice or social justice or distributive justice, demands that economic resources and wealth should be so distributed among the members of the community that on the one hand the gulf between the rich and the poor should be bridged and on the other hand everyone should be provided with basic necessities of life Principle of Justice  Islamic principle of economic freedom means that an individual has been allowed liberty by God to earn wealth, own it, enjoy it and spend it as he likes. It also entails freedom to adopt any profession, business or vocation to earn livelihood. But Islam has not allowed unlimited freedom in the economic sphere. In the field of production, distribution, exchange and consumption, only Halal (lawful) means are permitted. Remaining within the restrictions of Halal Economic and Haram, an individual Freedom enjoys full freedom to earn and spend wealth as he likes.  Islamic Worldview vs Western Worldview of Islamic Theory Definition of Falah Al falah literally can be defined as heading towards a positive way like become a happy person, always has good luck and successfully achieve goals. Hence, falah according to Quranic verses which is means “the ultimate goal of human life should be the achievement of falah in the hereafter, but it would be reward for one’s deeds during his stay in this world”.  Resources of Earth This study is about human behavior towards resources of earth and investigates those modes of utilisation which may lead to falah. Resources of earth are meant to provide livelihood to the creatures of Allah SWT. Islamic economic studies resources from the point of view of adequacy rather than scarcity. It starts from the premise that the resources of earth are adequate to achieve falah.  If the event of minimal scarcity, then mankind must have been doing something wrong, and ways and means should be found to restore the resources to it natural state adequacy. This may be broaden the productive base, improving technical know-how, and re- distribution of resources. There is a moral dimension to this question as the man is accountable for his deeds in the akhirah.  Cooperation and Participation Inter-personal relationships in Islam are based on the universal brotherhood (ukhuwah) of all human being. The concept of Al-falah can be classified into micro and macro level. Micro- level of survival group is pertaining to biological, economic, social and political. Mankind should be aware and self-reliant because to live well in this world, we should work hard in real life and for hereafter.  Macro level of survival in Al- Falah include the maintaining balancing ecological, hygienic environment and medical aids for mankind. The importance of survival lies in managing natural resources to generate more employment for the entire population of this world.  Why Islamic Economics? The study of Islamic economics is important not only for its own sake but also for the sake bridging the missing link of the modern economics itself. As a result, there is a need for an independent discipline of Islamic economics for the whole of mankind for the following reasons:  Contemporary economic system has evolved in purely materialist Western developed societies. As spiritual, cultural, social and political set-up in Islamic society is dissimilar to Western society, it Bridging the missing link follows therefore that a Western- style economic analysis should not fit every society. Because contemporary capitalistic economic system is value neutral. Therefore, the study of Islamic economics is expected to establish a link between economic values and socio- moral values. Third World countries, particularly Muslim countries, are facing economic crisis and conflicts in their development and modernization process. It widely believed that current international order, Resolving the economic crisis which is in a state of crisis, is incapable of explaining and influencing the course of current events and that only Islam can provide viable solutions to these problems. Herein lies the importance of interpreting society’s socio-economic problems from an Islamic perspective, and hence the importance of Islamic economics (Chapra 2000) Muslims are under obligation to comply with the Shariah ethics of the Quran and Sunnah, such as helping the poor and the needy, or paying zakah and sadaqa. It is here that the Islamic economists should come Meeting Islamic responsibilities forward, identify the relevant socio-economic prescriptions from an Islamic perspective, and make use of them in creating Islamic economics as scientific discipline.  Conventional economics is a positive science; it scientifically analyses and examines the cause of a problem. It has no concern about ethics and norms Islamic economics has a normative feature, which is as important as the positive feature. Economics Framework An Islamic economist critically analyses the observable economic fact, makes a statement about its consequences, and then suggests ways and means that these should conform to Shariah (Chapra 2000) Conventional economics studies on human behavior in the context of market. Conversely, Islam considers life as a unity where economics is only a sub-system of the complete Islamic code of conduct. Human behavior Thank You