Nature and Need for Islamic Economics

Islamic economy consists of a school of economics and not the science of economics. Hence, when we say that Islam has a school of economics, we do not mean that it has the science of economics. Islam has not come to discover the phenomena of economic life and their causes. That is not its responsibility. Just as it is not supposed to state the laws of astronomy, it is also not supposed to state the laws of economics. Islam has come to organize the economic life and to evolve a system based on social justice. Islamic economy represents a just system of economic life, but it has nothing to do with the scientific discovery of the economic relationship as it actually exists. In other words, if for example, Islam had discussed the causes of the rise in the price of interest bearing shares, its discussion would have been scientific, but it has, on the other hand, evaluated these shares and declared them forbidden. According to it only equal participation and profit sharing should form the basis of the relationship between financier and an entrepreneur. Now as we clearly know the nature of Islamic economy, we can see what prevents the people from believing that there exists such a thing as Islamic economy. Most of the people deny the existence of Islamic economy because they do not differentiate between the science of economics and the school of economics. They ask as to how there can be an Islamic economy when in Islam there is no such discussion of economic problems as conducted by Adam Smith and Ricardo. Islam has made no mention of the law of diminishing returns, the law of supply and demand and the law of wages and has not also discussed the general theory of value. How can the existence of Islamic economy be admitted when it is known that economic discussion have developed only during the past four centuries with the efforts of such pioneers as Adam Smith and the physiocrats and the commercialists who preceded him? Those who deny the existence of Islamic economy uphold the above arguments.

They seem to be under the impression that we claim the existence of economic discussion in Islam. But after we know the difference between the science of economics and the school of economics and understand the Islamic economy is a school, no room is left for the denial of its existence.

The Muslim society of today is not yet a society on its own, explains Syed Nawab Haider Naqvi. It is still under the shadow of the Western system: and, as such, it is doubtful how representative of the Islamic ethos its current behavior can be. Naqvi implies that the contemporary economic practices and systems in Muslim nations might not finally accord with Islamic scripture, the Quran, or tradition. Muslims insist that human nature, motivation, and work must reflect the ethical convictions of Islam.

Abu Yusuf (731-798)

He was a student of the founder of the Hanafi Sunni School of Islamic thought, Abu Hanifah. Abu Yusuf was chief jurist for Abbasid Caliph Harun al-Rashid, for whom he wrote the Book of Taxation (Kitab al-Kharaj). This book outlined Abu Yusuf's ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tariffs. Al-Ghazali (10581111) He classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static

Ibn Khaldun (13321406) He wrote about the economic system in Islam in the 15th century. Ibn Khaldun, in particular, was described once by the famous British historian Arnold Toynbee as the greatest sociologist who ever lived. Ibn Khaldun was both a sociologist and economist because he dealt in a systematic way with some aspects pertaining to economics. Throughout Islamic history, there have been numerous jurists and scholars who also wrote about certain aspects of Islamic economics, but these writings were scattered in a variety of books of jurisprudents.
Shah Waliullah (17031762) Shah Waliullah discussed the four basic principles of economics; the production of wealth, the consumption of wealth, the distribution of wealth and the exchange of wealth. He proposed that the whole nation should participate in the production of wealth, so that the wealth should be

distributed throughout the whole nation. He established the principles for distribution of wealth among the people as well as the value of a fair method for wealth consumption.