METHODOLOGY OF ISLAMIC ECONOMICS: WHAT AND WHY?

Methodology can be seen as a specific part of that branch of philosophy called epistemology.

Definition of methodology according to:

Blaug (1993) defines the methodology of economics as the branch of economics where we study how economists justify their theories, and the reasons they offer for preferring one theory over another.

Safi (1996) - is the field of scientific inquiry into the justification, description, and explanation of the rules and procedures which constitutes scientific methods.

Fox (1997) - sees methodology as dealing with theory appraisal.

Haneef (2005) - views methodology of economics as including discussions and analyses of the process of building models, developing theories, testing hypotheses (where necessary), as well as establishing and using criteria to evaluate the process.

 Reasons why methodological knowledge of Islamic economics is important

a) Without a proper methodology of Islamic economics task could not be done properly.

b) Distinguish between what is false and true in appraising and evaluating Islamic economic theories.

c) Concerned about formulation of theories that are workable and can be applied in real life.

d) Important to link the ontological aspects of Islamic economics, which constitute the ideals and principles of Islamic economics, to the axiological aspect (ethics) that is a practical application of Islamic economics.

e) Aims to lay down the scientific operational process of Islamic economics as a discipline so that the ‘gaps’ in Islamic economic studies — as termed by Siddiqi (1982), Khan (1989) and Zarqa (2003) — between those who are well-versed in Islamic legacy but lack modern economics on the one hand, and those who have understanding of modern economics but are lacking in Islamic legacy, could be eliminated.

References :  methodology of Islamic economics :Overview of present state and future direction. International Journal of Economics, Management & Accounting 19, no. 1 (2011): 1-26

MASUDUL ALAM CHOUDHURY- ISLAMIC ECONOMICS AS SOCIAL SCIENCE

It can be summarized as below...

Compartmentalization of Knowledge in Western Social Sciences

- The field of social sciences comprising in the main the disciplines of economics, political science, sociology, anthropology, but secondarily also of social psychology, religion, law and history, is a product of the eighteenth century

-  The Physiocratic school upheld the primacy of agriculture as the principal productive activity of the nation. The ethical meaning in it are as follows ;
 a) satisfaction of basic needs was the primary goal of the social economy.

 b) it showed that agricultural production was upheld in favor of maximizing employment and use of labor intensive technology.

 c) sectorial linkages with agriculture would result in price stability in the product and factor markets.

 d)  full capacity utilization in labor intensive production with the primacy of agriculture, meant stable wages for the producers.

Continuing Insulation of the Social Science Disciplines in the Twentieth Century
-  there has been specialization in the area of developmental-ism, explaining the social and economic developmental processes; there have been works in the direction of developing social systems and interaction-ism.

The Evolution of Economics as a Social Science in the Twenty-First Century: The Mixed Economy and the Re-emergence of Political Economy.

A mixed economy is defined as the environment conducting the distribution of wealth and resources under menus of production and consumption that are either evolved in the market system or the command type economic system.

The factors that gave rise to the emergence of the mixed economy are:

(1) the importance of government investment, planning and control of large sectors of the economy.

(2) the changing role of profits in relation to economic growth.

(3) labor and capital market imperfections in the hands of powerful labor unions and stock markets.

(4) the existence of the welfare state in Western nations; (5) the international division of labor and sharing of resources.

The emergence of the mixed economy points to the dawn of a re-emergence of political economy.

Political economy is defined here as the integrated study of social phenomena in their widest variety, with the assumptions, social and moral conditions, and methodology, capable of providing both an analytical as well as an institutional examination of the social problems.

Difference in definition from textbook is due to two factors 


a) There is the absence of a predetermined causal relation in Marxist Dialectic.

b) In the institutionalize framework there is the absence of analytical requirement of the underlying methodology, within which the study of institutions is to be subsumed.
Future Evolution of Economic Science


- The treatment of the study of economics in the future as a mixed economy, investigated within the methodology of political economy.

- In the field of economics, institutional economics, mixed economy and political economy are penumbras of each other with a common core.
https://www.emeraldinsight.com/doi/pdfplus/10.1108/03068299010006367

THE ECONOMISTS- HOW SCIENCE GOES WRONG?

Here are few points that i'd like to extract from -

- " But success can breed complacency. Modern scientists are doing too much trusting and not enough verifying- to the detriment of the whole of science, and of humanity" . It makes sense to me. Modern scientists nowadays are of few new findings and they seem to just support the evidence of old research and refute them. Hence, they need to produce new findings.

- competitiveness of science. 

- careerism encourages exaggeration and the cherry picking of results. Only most striking findings have the greatest chance.

- failure to prove a hypothesis are rarely even offered for publication,let alone accepted.

- research protocols should be registered in advance and monitored in virtual notebooks.

- most enlightened journals are already becoming less averse to humdrum papers.

Read here for more - https://www.economist.com/news/leaders/21588069-scientific-research-has-changed-world-now-it-needs-change-itself-how-science-goes-wrong

ISLAMIC ECONOMICS- definition, methodology, usul al fiqh

Test yourself about usul al-fiqh down below !

www.quizyourfriends.com/take-quiz.php?id=1804141704401493&lnk&

• Al-Qur’an and as-sunnah
• Consensus of opinion (ijmà’)
• Analogical deduction, qiyàs 
• Istihsan (Juristic preference) 
• Public interest, maslahah or istislah, 
• Custom or 'urf

Islamic economics

1. aims at the study of human falah achieved by organizing the resources of earth on the basis of cooperation and participation (Akram Khan,1404)

2. knowledge and application of injuctions and rules of Shariah that prevent injustice in the application and disposal of material resources in order to provide satisfaction to human beings and enable them to perform their obligations to Allah and society (Hasanuz zaman, 1404)

3. study of Muslim behavior who organizes the resources, which are trust, to achieve falah ( Muhammad Arif,1405)

HOW ISLAMIC ECONOMICS WORKS??

M.A. MANNAN - 3 METHODOLOGICAL ISSUES OF ISLAMIC ECONOMICS AS SOCIAL SCIENCE

At the end of this post, there"ll be a quiz for this...



1.  Is Islamic economics a positive or a normative science or both

Some Muslim economists tried to maintain distinction between positive and normative science, thereby molding Islamic economic analysis in an intellectual framework of the West. Other positivists simply say that Islamic economics is a normative science. To me, it is neither a positive nor a normative science. In Islamic economics, normative and positive aspects of science are so interlinked that any attempt to separate them could be misleading and counter productive. This is not to suggest that Islamic economics will not have any distinguishable normative and positive components. In fact, the Qur'an and Sunnah which are treated primarily as a source of normative statements, have many positive statements. This does not, however, qualify us to declare Islamic economics either as a positive or normative science.

2. Do we need an Islamic economic theory in view of the absence of an actual Islamic economy?

My categorical answer is: Yes. It is the plea of the positivists that there is no need to develop Islamic economic theory because of the absence of an actual Islamic economy where ideas could be tested against actual problem. It is argued that the theory must explain the facts as they are. As such it is said that there is no case for an Islamic economic theory, as it has nothing to explain and predict from the existing socioeconomic reality of contemporary Muslim societies. To them, the test of a theory lies in its ability to explain and illuminate reality, although every theory distorts reality by simplifying it.

3. Is Islamic economics a "System" or a "Science"?

To me, it is both. Although it is essentially a part of a "system", a fine case can, however, be made for Islamic economics as a "science". The word "system" is defined as a "complex whole: a set of connected things or parts and "science" as "systematic and formulated knowledge" (Oxford Pocket English Dictionary). In a similar vein, the word "science is defined in the New Columbia Encyclopedia as the organized body of knowledge concerning the physical world, both animate and inanimate. but a proper definition would also have to include the attitudes and methods through which this body of knowledge is formed. Following the definition of a "system we can easily say that Islamic economics is certainly a part of a complete code of life based on four distinct parts of knowledge: "revealed knowledge" (i.e., the Qur'an), the then existing practices of the society as adopted by the Prophet (be peace on him) and his actual sayings (i.e., Sunnah and Hadith) subsequent analogical deductions, interpretations and consequent consensus of the community or doctors of religion (i.e., ijma).

Note that the above explanation are just the summary. Do click here to understand better -https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3126914


So here's the quiz !😛
www.quizyourfriends.com/take-quiz.php?id=1804130758294395&lnk&

7 STEPS IN THE DEVELOPMENT OF ISLAMIC ECONOMICS AS A SCIENCE

They're interlinked with each other.

Step 1:  We have identified three basic economic functions - consumption, production and distribution common to all economic systems irrespective of their differences in ideologies.

Step 2: Some of the fundamental principles governing these basic functions seen from the timeless Islamic perspectives rooted in the Shari'ah. Take the example of "moderation" in consumption. This principle of "moderation" is to be reflected in the consumption behavior of Muslims both at micro and macro level. This principle has, no time dimension: it is essentially based on the Islamic worldview in economic matters (i.e., normative values).

Step 3: Now there is a need to identify the method of its operation (i.e., process); this "knowledge" needs to be formulated or conceptualized. This is where the development of the theory starts and Islamic economic science begins. Thus the choice of variables or the use of ethically-based economic reasoning is to be directed to infer behavior patterns appropriate for the achievement of pre-selected objectives (i.e., moderation). Thus in explaining consumption function in an Islamic economy it should be possible to identify variables rooted in the Shari'ah. This theoretical formulation has time dimension. It can be replaced or modified by a superior theoretical formulation. They are value-loaded indeed.


Step 4: It follows that once this concept of "moderation" is formulated, we need to prescribe a definite basket of goods and services to achieve the goal of "moderation" either at individual or at aggregate levels. Its contents and composition are changeable; it depends on the level of social and economic conditions of the society concerned.


Step 5: This step refers to implementation of the policy chosen in step (4). This implementation can be done either by exchange through price mechanism or by transfer payments. This is where we need the development of institutions for the implementation of policy.


Step 6: This step indicates the need of evaluation in terms of predetermined or perceived goals or targets, which aim at maximizing our welfare within the over-all framework of principles set out in step (2) as well as dual notion of return, economic and non-economic thereby making positive and normative considerations relatively indistinguishable and unimportant.


Step 7: This step gives the results of evaluation. This feedback is needed to determine the gap between actual implementation of policy step (5) and perceived achievement. This is where the interpretation of principles (as indicated in step 2) on which the Islamic economic system is based begins. This is where the reconstruction of Islamic economic theory on which development of the policy and institution is based starts (as stated in steps 3, 4 and 5).

References from : Shafey, Erfan, M.A. Mannan, Islamic Economics as a Social Science: Some Methodological Issues (1984). Journal of King Abdulaziz University: Islamic Economics, Vol. 1, No. 2, 1984. Available at SSRN: https://ssrn.com/abstract=3127496

HOMO ECONOMICUS VS HOMO ISLAMICUS

AN OVERVIEW OF HOMO ECONOMICUS

Is Homo Economicus A Psychopath?

Click here to read more -> https://www.forbes.com/sites/peterubel/2014/12/15/is-homo-economicus-a-psychopath/#220a9af71604

 Homo Economicus is “the human species in its capability to rationally decide, that is, essentially that people will act in their own best interest when making decisions without moral consideration. One of the characteristics of Homo Economicus is selfishness. For instance, unwilling to give charity as it seems not profitable for them.

( Farooq, Mohammad Omar, Self-Interest, Homo Islamicus and Some Behavioral Assumptions in Islamic Economics and Finance (2011). International Journal of Excellence in Islamic Banking and Finance, Vol. 1, No. 1, pp. 52-79, January 2011. Available at SSRN: https://ssrn.com/abstract=1740729)

Conversely, Homo Islamicus is individuals who is guided by commonly shared Islamic values in his or her decisions. A society with Homo Islamicus participants would act both individually and collectively within the framework.Islam recognizes that every human being has an inherent tendency to maximize material well-being. The ultimate objective is maximization of maslahah .

The main distinction between those two is altruism .

Read further : http://www.hurriyetdailynews.com/homo-islamicus-needed-to-cure-problems-in-modern-economy-business-leader-says-66736