the same as that of conventional economics and many of whose proponents feel that neoclassical economics and institutional economics are complementary rather than mutually exclusive, the Nobel Laureate, Professor Douglas North, clarifies: “Introducing institutional analysis into static neoclassical theory entails modifying the existing body of theory. But devising a model of economic change requires the construction of an entire theoretical framework, because no such model exists.”14
However, if there is a substantial difference even in worldviews and visions, there is no reason why there cannot be greater differences in the disciplines. One discipline may just seek to explain what exists, refuse to make value judgements, and not concern itself with social change for realizing a certain vision of life. Another discipline may not find ‘what is’ to be acceptable and so seek to help realize the desired social vision. A discussion of how, and through what process, the vision may be realized is then, perhaps, unavoidable.
To say that the effort to create Islamic Economics leads to isolationism15 is true only if arrogance and bigotry prevail in either one of the two disciplines and prevent mutual interaction. A rational and amicable discussion of different worldviews and disciplines may, in fact, promote greater depth and breadth in the analysis of both disciplines through cross pollination, and thus make the world richer and better off. Feyerabend is, hence, right in asserting that the “proliferation of theories is beneficial for science while conformity impairs its critical power. Uniformity also impairs the free development of the individual.”16
The above discussion may appear to be abstract, but once we start discussing conventional and Islamic Economics, it would be possible to see why the development of Islamic Economics is necessary if the Islamic vision of human society is desired to be realized.
Notes
1. Brzezinsky, 1995, p. 53.
2. Alfred North Whitehead, cited by Milton Myers, 1983, p. v.
3. See the three papers on “Economics and Happiness” by Oswald, Frank, and Ng, in the Economic Journal, November 1997, pp. 1812–58.
4. It may be useful to be clear about the difference between the terms distribution and redistribution. Distribution refers to the allocation of resources that takes place automatically through the operation of market forces. However, when a society uses extra-market or other non-market processes to change that distribution in accordance with the concept of justice embodied in its worldview, it is referred to as redistribution.
5. Easterlin (1973), in Heilbroner and Thurow, 1975, p. 538. See also Easterlin, 1995; Oswald, 1997.
6. Literature on the determinants of human well-being is growing rapidly. For a survey, see David Myers, 1993.
7. For a more detailed discussion of these, see Chapra, Challenge,1992, pp. 213–33.
8. Values refer in this book to the moral obligations of individuals towards themselves as well as to their families and society. They indicate the desired behaviour by specifying what is good or bad, right or wrong, and just or unjust. Their objective is to tone down the serving of self-interest by individuals to ensure justice, the well-being of all, and social harmony. The incentive for fulfilling moral obligations comes from love of God, and the desire to gain His pleasure and reward in the Hereafter. This may not, however, always be sufficient to make everyone act righteously. It is also necessary to have this-worldly rewards and deterrents.
Values become institutions when they are converted into formal rules, laws, conventions and constitutions, such that they are no longer just a moral obligation but also a legal obligation. The institutionalization of values implies setting in place a mechanism for detecting and punishing the violators, irrespective of their wealth and position.
9. Lovejoy, 1960, p. 7.
10. See the words method and methodology in Webster’s Ninth New Collegiate Dictionary. See also Caws, 1967, p. 339; Blaug, 1980, p. xi.
11. See Machlup, 1978, p. 54; Blaug, 1980, p. 264.
12. Caws, 1967, p. 339.
13. Feyerabend, 1993, p. 3; parentheses are in the original.
14. North, 1990, p. 112.
15. Kuran (1996) expressed this fear, p. 196.
16. Feyerabend, 1993, p. 5.
There are growing numbers who suspect that all is not well in the house economics has built.
(Mark Blaug)1
Man is a moral animal and no political or economic order can long survive except on a moral base.
(Nigel Lawson)2
Conventional economics has undoubtedly made immense progress, particularly after World War II. If one were to evaluate its contribution in terms of the scientific sophistication that it has attained so far, it would perhaps get full marks. Its contribution far outshines that made during any other comparable period in human history. However, while human beings have an interest in the sophistication of a discipline, their greater interest lies in the help that it can provide in solving their problems and realizing the goals that they have set before themselves. So how does conventional economics fare on this criterion?
Conventional economics has put before itself two different sets of goals. One of these is what may be termed positive, and relates to the realization of ‘efficiency’ and ‘equity’ in the allocation and distribution of scarce resources. The other is what may be called normative, and is expressed in terms of the universally-desired socio-economic goals of need-fulfilment, full employment, optimum rate of economic growth, equitable distribution of income and wealth, economic stability, and ecological balance, all of which, in addition to social harmony and the absence of anomie are, in varying degrees, considered indispensable for actualizing human well-being. Both of these set goals aim at serving the individual as well as the social interest in conformity with the worldview that underlies each of them. Nevertheless, the first set has been called positive because of the claim that efficiency and equity can be determined without value judgements, while the second has been called normative because it reflects, to a great extent, society’s vision of ‘what ought to be’.
Whether or not these positive and normative goals are mutually consistent depends on how efficiency and equity are defined. This will become clear as this discussion progresses. It is difficult to say whether conventional economics has been able to realize its positive goals because of the difficulty of defining and measuring both efficiency and equity in a dynamic economy. However, it is generally agreed that even rich industrial countries have been unable to realize all their normative goals simultaneously in spite of the substantial resources at their disposal. If some of these goals are realized, it is at the expense of others. The available evidence seems to suggest that the failure has gradually become more and more pronounced with the passage of time. So what could the reason for this failure be?
