Why Islamic Economics?

Failure of other economic systems to address the core problem of fulfilling needs with the scarce resources Conventional belief is that human beings have unlimited wants constrained subtitle style Click to edit Master by limited resources (income vs factors) Hence, the struggle for efficiency & Pareto optimality.

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Quick Look at Capitalism

a. Featured by:oaccelerated

wealth expansion, max.

production & want satisfaction in acc. with ind. preference,

opursuance ofree

of self-interest,

gov.

competitive markets with minimum to meet collective social

intervention 5/2/12 interest

b. Logic of the System / Claimed Symmetry:

oPrivate

= Public Interest

oInteraction

btwn. utility max. consumers & profit-max. producers to det. Market clearing prices.
oChoice

of preference reflective of harmonious exchange of goods with factors.

oDifferentials

savings.

in wealth is justified by

oInterventions
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only to offset mkt. failure in supply of public goods.

c. Worldview influenced by the Enlightment

Movement btwn. 17th 19th century, known as the Age of Reason. - Reduced role of religion in human affairs and acceptance of the Newtonion WV of God as the clock-maker.

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- Social Darwinism reinforced the idea of survival. - Positivism, denied existence of substances that could not be est. by experiment. - Materialism prov. the commercial culture to multiply wants and value feelings as illusions. - Determinism implying mind as a raw material for external forces.

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d. The Shortcomings due to Unrealistic Assumptions i. Rationality does NOT demand valuejudgements on social priorities. ii. Price mechanism does not guarantee a fair distribution. iii. The questions of what and how to produce depend on the powerful few. iv. Over-emphasis on Growth at the expense of sustainable development.

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Sour Fruits:
Long periods of prosperity did NOT lead to removal of poverty and basic need fulfillment for ALL. Why? The Conflict between the goals of a society and the worldview & strategy of capitalism! The goals were humanitarian based on moral foundation BUT their WV, social Darwinism.. Hence, the inefficient allocation of resources, unequal dist. of income & wealth, distorted priorities, imperfect competition, etc.
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Various versions with common features; critique on mode of production, free markets, private property & wage system as the root of evil. Essentially differed in mechanisms, though btwn. Marxist, market and democratic exist variations. Primary goals were equity & a classless society. H/w to create an ideal human soc. without religious values did NOT work either! from each according to his ability, to each according to his need only meant that there was no motivation for one to offer his maximum
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Problems with Reform:

Tailored within a secularist framework of Capitalism reduced gov. spending & credit expansion to resore stability, removal of bureaucratic controls, privatization. Gave rise to other issues, unemployment & high inflation, leading to the idea of Welfare State. Basic Strategies; (i) Regulation of priv. ent. to ensure competition (ii) Nationalization (iii) Labour Movements (iv) Fiscal Policy (v) High Growth (vi) Full Employment 5/2/12