1. ECONOMICS AND ISLAMIC ECONOMICS
AUSAF AHMAD
Presentation on May 27th 2007 At
Imaarat Shariah, Patna, Bihar

2. Dominance of Economic Issues
Dominance of economic issues in social discussions.
Economics has become the intellectual religion of the day.
Lack of economic literacy
Economic education

3. CLASSIFICATION OF KNOWLEDGE
Divine
Knowlege
Human
Knowledge
Arts
Sciences
Natural
Sciences
Social
Sciences

4. NATURAL SCIENCES MATHEMATICS NATURAL SCIENCES ASTRONOMY PHYSICS
Chemistry
Biology

5. SOCIAL SCIENCES SOCIAL SCIENCES ECONOMICS SOCILOGY POLITICS
ANTHROPOLYGY
HISTORY
PSYCHOLOGY

6. DIFFERENT APPROACHES TO ECONOMICS
Classical approach: Smith, Ricardo, J.B. Say
Economics is the Science of Wealth.
Critique of Classical Approach: Marx and Carlyle
“Dismal Science” and “Bread and Butter Science”
Neo Classical Approach:
Economics studies human welfare
Modern Approach:
Economics studies how unlimited wants could be fulfilled with limited resources. It is a science of choice.

7. Economic goods and Free goods
Distinction between economic goods and Free goods.
Scarcity as a fact of economic life
There is nothing like a Free lunch.

8. Economy and Economic organization
Meaning of Economy
An economy is a organization of human beings through which they carry out certain basic economic activities such as production, exchange, distribution and consumption to fulfil their needs.
Basic Functions of an Economy

9. BASIC FUNCTIONS OF AN ECONOMY
WHAT TO PRODUCE? [issue of Allocation of Resources ]
HOW TO PRODUCE [ issue of choice of techniques ]
FOR WHOM TO PRODUCE [ issue of Distribution of the produce

10. PRODUCTION POSSIBILITY CURVE
Guns in thousands
Substitution between Guns and Butter YC Y3 Y2 Y1 XC x1 x2
Butter in thousand kg x3

11. DIFFERENT VIEWS OF ECONOMY
CONSUMPTION UNITS
households
Individuals
Economy

12. DIFFERENT VIEWS OF ECONOMY
PRODUCTION UNITS f
Firms
industries
Sectors
Sectors
Economy

13. DIFFERENT VIEWS OF ECONOMY
EXCHANGE UNITS
Markets
Economy

14. METHODS OF ECONOMIC INQUIRY
Theoretical Methods
Empirical Methods
Both Methods are used in Economics
No method is superior or inferior to other.
Each method has its own limitation.
To judge an economic data (result, principle or theory) one must consider how it has been arrived at.

15. THEORETICAL AND EMPIRICAL METHODS
Experimental
Design
Real World
Logical Model
Experimental Abstraction
Theoretical
Abstraction
Experiment
Logical
Reasoning
Statistical
Interpretation
Result of Experiment
Conclusions about the Real World.
Theoretical Interpretation
Logical
Conclusion

16. Deductive and Inductive logic
Deductive logic.
Major and Minor Premises
Conclusion is correct if major premise is correct. For example:
All human beings are mortal.
John is a human being.
John is mortal.
Necessarily True

17. EMERGENCE OF ISLAMIC ECONOMICS
Economics is not a very old science. Islamic economics is even newer.
The emergence of Islamic economic is the result of dissatisfaction with the value premises of Economic theory.
Economic theory treats man as human economicus, motivated by only self interest which is supreme to every thing else.
Economics divorced economic behavior from Ethical behavior.

18. Deductive and Inductive logic
Incorrect Premises lead to incorrect conclusions:
All Men are Stupid
John is a man
John is stupid.
Not necessarily true

19. Deductive and Inductive logic
John is stupid
Tom is stupid
Jack is stupid
John, Tom and jack are humans
Therefore, all humans are stupid.
Not Necessarily True
Based on the Law of Uniformity of Nature, which is itself unproved.

20. MICRO AND MACRO ECONOMICS
Micro economics is the study of functioning of one unit of the economy i.e. an individual, a household, a market etc.
Macro economics is the study of functioning of full economy, different units interacting with each other.
It is not correct to say that one is more important or more correct than the other.

21. ISLAMIC CRITIQUE OF MODERN ECONOMICS
Islam does not approve of value premises of modern economics.
Modern economics assumes and treats man as homo-economicus, motivated only by self interest.
The economy is perceived to be driven only by Profit motive.
Modern economy gives more weight to efficiency in comparison to equity and justice.

22. EMERGENCE OF ISLAMIC ECONOMICS
Economics is not a very old science. Islamic economics is even younger.
The contributions of Muslim thinkers and philosophers have usually been neglected in the history of economics.
Attention to Islamic economic system was diverted from Islamic banking and financial system.

23. Rudiments of Islamic Economic System
SYSTEM OF OWNERSHIP:
Private ownership of property
Public ownership of property
Voluntary ownership of property
PRICE MECHANISM:
Usually markets would be free but could be regulated, non market controls, Mohtasib
ROLE OF STATE
Balanced role

24. INTRODUCTION TO ISLAMIC ECONOMICS
ISLMIC BANKING AND FINANCE
MONETARY POLICY
FISCAL POLICY
MICRO ECONOMICS
MACRO ECONOMICS
DEVELOPMENT ECONOMICS

25. YOUR TIME AND CONSIDERATION.
EPILOGUE
THANK YOU
FOR
YOUR TIME AND CONSIDERATION.