Islamic Critique of Neoclassical Theories
The paper (attached below) has a lengthy intro, after which the following issues are presented on which Islamic teachings contrast with those of Samuelson:
A REVISED VERSION of the paper was published in Journal of Business & Economics published by PAF-KIET:
Individually selfish behavior leads to good social outcomes
Individually selfish behavior leads to corruption on the earth.
Individual and social behavior, and economic outcomes, are subject to mathematical laws.
Q73:19 Lo! This is a Reminder. Let him who will, then, choose a way unto his Lord. Individuals can choose their path, and their choices cannot be predicted by mathematical laws
Individuals are naturally selfish, and this motivation is the best predictor of human behavior in economic affairs.
By the process inviting towards the good (Amr bil Maaroof) individuals and societies can be transformed to become cooperative, generous, and trustworthy, and overcome their base desires to be greedy, acquisitive and competitive.
Acquiring sufficient wealth will lead to a utopia where everyone is free from want, and people will become kind and just.
Accumulation of capital, and pursuit of increased productivity by industrialization, technology, etc. will remove problems of scarcity and want, and lead to development.
Economic theory is positive and makes no value judgements. Any re-distribution of wealth requires value judgements, and hence is not part of positive economic theory.
There are not enough resources on the planet to satisfy everyone, and therefore we must work on increasing production
To fail to re-distribute wealth is as much a value judgement as redistribution. When required to save lives, redistribution of wealth is required by Islam.
There is more than enough production for everyone’s legitimate needs. Greed and acquisitiveness lead enormous numbers of people to save vastly beyond their needs, disregarding the needs of others completely.
True wealth is the wealth of the heart. Pursuit of wealth will lead people to desire even more, instead of contentment.
Focus on developing human beings morally, spiritually and in all dimensions. Human beings are the best of the creation and if we develop their potential, development in all dimensions will follow.
Remove obstacles to free operation of markets. The powerful instincts of selfishness and greed of humans will lead them to acquire wealth in the most efficient manner and will enrich the society via the mechanism of perfect competition
Providing money and power to capitalists, and keeping wages low will lead to rapid investment and growth, benefits of which will eventually trickle down to the poor, after an initial period of increasing inequality.
Build integrity of character, trust and cooperation in a society. Encourage the wealthy and powerful to care for the weak and poor. This will build societies which are rich spiritually, morally and materially.
Support the poor and protect the weak from exploitation. Provide economic justice and equal opportunities to all. This will allow all to participate in the process of development and lead to robust growth on all fronts.
Operations of a free market determine a unique set of equilibrium prices which decentralize production and consumption decisions and lead to socially optimal outcomes.
Morality and Ethics are subordinate to the pursuit of profits.
Firms are only responsible for their immediate actions, and not for long term consequences or how consumers use/abuse goods sold to them.
It is only actions, good or bad, which matter, and not the intention behind them.
Consumer sovereignty or the equivalent assumption that interpersonal utility comparisons are not scientific, means that wants and needs are on par. Furthermore, it is descriptively accurate (positive economics) to state that people are primarily motivated by self-interest in economic affairs.
The Quran encourages people to spend on their own needs, but also to spend excess above their needs on needs of others. Q2:219 …They ask thee how much they are to spend; Say: "What is beyond your needs." It strongly discourages pursuit of idle desires, luxuries and conspicuous consumption. Following Quranic prescriptions will lead to economics based on simple lifestyles, hospitality, cooperation and trust of a type which cannot be imagined within a neoclassical framework.
Morality and Ethics are primary, and pursuit of profits is permissible only when it does not conflict with moral goals.
Producers have responsibility for everything which occurs directly or indirectly as a result of their acts, as long as these can be foreseen.
Charitable or socially responsible acts done in pursuit of profits will not yield good results in this world or the next.
Market mechanisms fail to provide justice in many instances. Corrections require individuals to behave ethically, as well as social regulations, encapsulated in the institution of Hisbah in Islam.