of all things on this earth and His creation has been given to humans of all generations in trust. Thus land and other natural resources must be developed in ways that benefit all humans of all generations equitably. It is imperative that the rights of the disabled and those of future generations are fully honored.
A major feature of the Almighty's rules, conveyed in the Quran and practiced by the Prophet (sawa), is justice. Thus the Islamic institutional scaffolding and the ideal Islamic economy exude justice. As a result, the promotion of social and human development on this plane of existence is founded on rules that promote justice. The Prophet (sawa) understood the essential objective of the message to encourage and insert justice in human societies as emphasized in the Quran. The Prophet (sawa) taught the responsibility of the individual, the collectivity, and the state. He particularly emphasized the equality of individuals before the law and that all rules that are incumbent on individuals and the collectivity must be more strictly observed by those in positions of authority, as illustrated by his famous saying: “Authority may survive disbelief but not injustice.” Insistence on justice became the hallmark of the institutional scaffolding of governance, a structure with full transparency and accountability. Rule compliance that embraces the pursuit of social justice is a requirement of each and every Muslim during every day of his or her life on this earth. Justice is essential in all endeavors, as the pursuit of justice leads to spiritual fulfillment and brings humans closer to their Creator. Rule compliance and justice cannot be compromised. In Islam, social and human development is multidimensional and goes well beyond the highest level of GDP and GDP per capita. Human spiritual pursuits on this earth cannot be compromised for material ends.
In Islam, conventionally measured GDP per capita and GDP growth are not society's only economic goals. There are overriding spiritual, moral, and human dimensions to all economic endeavors. Humans need bread to live but do not live by bread alone. The goal of progress and development is the overall well-being of humans and society. While this has been the goal in Islam, it began to be recognized through the work of Mahbub ul-Haq, Amartya Sen, and numerous other economists in conventional economics only in the late 1970s. Moreover, in Islam, institutions have been seen as an essential element and the foundation of achieving human and economic development. This idea became popular in conventional economics only about 30 or so years ago; it had been almost forgotten from the writings of Adam Smith with the emergence of neoclassical economics. Institutions are the formal and informal laws and rules that shape political and economic structures of society to reduce risk and increase trust. Risk reduction and trust enhancement in turn support economic progress and prosperity.12
Short History of Economic Thought in Islam
The last section provided a general description of Islamic teachings on economics, but we cannot sidestep a number of inescapable questions. Namely, given our claim that Islamic teachings on the economic system are based on the morality and ethics of centuries ago, why have the contributions of Islamic economics not entered into mainstream economics? Why is it that apparently none of the concepts of conventional economics is based on Islamic economics? And why is it that Islamic economics is not more developed as a social science so that it could be at least taught in Muslim countries as a stand-alone economic system? While space limitations preclude a full discussion, brief references may begin to address the issues.
Mirakhor made one of the early attempts to point to the neglect of Muslim contributions to modern economics.13 It is disheartening that after discussing Greco-Roman economics, Joseph Schumpeter in his magnum opus, History of Economic Analysis, states: “So far as our subject is concerned we may safely leap over 500 years to the epoch of St. Thomas Aquinas (1225–1274) whose Summa Theologica is in the history of thought what the south-western spire of the Cathedral of Chartres is in the history of architecture.”14
This statement is the reason he titles this section of Chapter 2 of his book “The Great Gap.” The implications of this statement, as well as the rest of the material in this section of Schumpeter's book, is that for 500 years nothing was said, written, or practiced that had any relevance to economics. In this respect, Schumpeter was merely reflecting an attitude in the coverage of the history of economic thought existing since the late 1800s. The fact that his book became the locus classicus of all works on the history of economic thought only means that this idea would continue from that time on. It is a demonstrable fact that almost all books about the history of economic thought to present-day textbooks echo Schumpeter's sentiments about economic thought prior to the Scholastics (the philosophers who were responsible for the economic thinking in the medieval period, which lasted from 500 to 1500).
Whatever may have been Schumpeter's reason for not recognizing and acknowledging the influence of Muslim scholars, the results were unfortunate for the history of economic thought. The fact that his book became such a celebrated reference in the discipline helped perpetuate what we may call a blind spot in the field that has continued to the present. Even if scholars wish to ignore the research in the history of philosophy, theology, ethics, and science, the mere fact that anyone who consults original writings of medieval scholars can see references to names such as Alfarabius (Al-Far
A number of early Muslim contributions included discussion of ideas on taxation, market regulation, usury, permissible economic behavior, wages, prices, division of labor, money as medium of exchange and as unit of account, admonition against debasement of money, coinage, price fluctuations, and, finally, ethical prescriptions regarding observance of the mean. These works have shown that during the first two and a half centuries of Islam, ideas were developed regarding fiscal policy, monetary policy and institutions, credit and credit instruments, price determination and price policy, market and market regulation, commodity exchange, usury, government budgets, use of taxation as a tool to encourage production and discourage accumulation of wealth, public treasury, deficit financing, methods of balancing governmental budgets, supply and demand, checking and savings accounts, rudiments of banking institutions and procedures on formation of partnerships and commenda contracts, and monopoly.
By the ninth century, many of these ideas had appeared in writing in the form of Islamic legal (fiqh) manuals. Udovitch's studies on commercial techniques, credit, and credit instruments existing in the world of Islam by the ninth century was based on analysis of these types of manuals as well as mercantile manuals of early periods of Islam. Based on his studies, Udovitch suggests: “The earliest Muslim legal sources now justify the assertion that already in the late eighth century, and possibly earlier, credit arrangements of various types constituted an important feature of both trade and industry” in the Islamic world.15 Similarly, the works of Abul-Fadl Ad-Dimashqi, a ninth-century scholar, show advanced ideas regarding value theory, cost and price determination.
As discussed in Chapra, historical records reveal a number of important early contributions by Muslim scholars to the development of Western economic thought and the Enlightenment movement in Europe. Unfortunately, with the passage of time, these contributions were either forgotten or attributed to others. Chapra similarly identifies a number of important Muslim contributions from secondary sources centuries before they were identified and incorporated in conventional economics, including:
interdisciplinary approach; property rights; division of labor and specialization; the importance of saving and investment for development; the role that both demand and supply play in the determination of prices and the factors that influence demand and supply; role of money, exchange, and market mechanism; characteristics of money, counterfeiting, currency debasement, and Gresham's law; the development
For a detailed discussion of these points, see Mirakhor (2010).
Mirakhor (2003).
Schumpeter (1954, pp. 73–74).
