ISLAMIC ECONOMICS ECS10403

1. ISLAMIC ECONOMICSECS10403 Topic 2 Contributions of Earlier Muslim Scholars to Islamic Economics

2. LEARNING OUTCOMES In this topic students will know in general the contributions of earlier Muslim scholars on Islamic economics through the following works: Abu Yusuf (731-798), Kitab al‐Kharaj Muhammad Al-Shaybani (740-804), Kitab al‐Kasb Al-Jahiz (776-869), Kitab al-Tabassur bi al-Tijarah Al‐Ghazali (1058-1111), Ihya' 'Ulum al‐Din Ibn Taymiyyah (1263-1328), Al‐Hisbah fi al‐Islam Ibn Khaldun (1332-1406), Al‐Muqaddimah Al‐Maqrizi (1364-1442), Ighathat al‐Ummah bi Kashf al‐Ghummah

3. DEVELOPMENT OF ISLAMIC ECONOMICS Source: Islahi, Abdul Azim, “Contributions of Muslim Scholars to Economic Thought and Analysis”, Jeddah: IERC, 2004:97 • Our analysis covers early Muslim scholarship during the periods of Formation, Translation and Transmission, i.e. up to about 1500 (c.e.)

4. DEVELOPMENT OF MAINSTREAM ECONOMICS Source: Islahi, Abdul Azim, “Contributions of Muslim Scholars to Economic Thought and Analysis”, Jeddah: IERC, 2004:98

5. CONTRIBUTION OF MUSLIM SCHOLARS TO ECONOMICS Source: Islahi, Abdul Azim, “Contributions of Muslim Scholars to Economic Thought and Analysis”, Jeddah: IERC, 2004:100 • Here we may appreciate the interaction and influence of Islamic economics from the beginning up to the modern period. • Typically, scholastic scholars borrowed from Muslims scholars on economics without acknowledgment: they “never cited Islamic sources in their discourse on economic issues”(Islahi, 2004:99).

6. DEVELOPMENT OF ISLAMIC ECONOMIC THOUGHT - Formation The Formation Period (11-100AH/632-718): following the revealed knowledge derived from the Quran & the Sunnah, Shariah teachings on economic and other issues led to the development of a chain of scholars and Islamic jurisprudence (usul al-fiqh) to solve social problems through juristic logic, such as Zayd b. Ali Zayn al-Abidin (695-740), Abu Hanifah al-Numan b. Thabit (700-767), Malik b. Anas (716-795), Muhammad b. Idris al-Shafi’i (767-820), Ahmad b. Hanbal (780-855). Al-Shafi’i first systemized Islamic law with Al-Risala on usul al-fiqh and Kitab al-Umm on Shafi’i fiqh. Students of these leading jurists emerged such as Abu Yusuf (731-798), Muhammad Al-Shaybani (740-804), Yahya b. Adam Al-Qurashi (757-818), Abu Ubayd al-Qasim b. Sallam (774-837). Economic ideas that were touched by these scholars include: the market & market regulation; supply & demand, prices; exchange, transactions & usury; public finance & fiscal policy including taxation (kharaj, jizya, ‘ushr & zakat), private finance & partnership organizations; agriculture; inheritance; private property & ownership.

7. DEVELOPMENT OF ISLAMIC ECONOMIC THOUGHT - Translation The Translation Period (2th-5th cent.AH / 8th-11th cent.): ‘Umar al-Khattab (r.a.) introduced account books ‘diwan’ (from the Persian word meaning ‘book’)in 20AH/640, and established the bayt al-mal (state treasury): improvements in government required scholarship in public finance and administration. The language of administration remained in Persian (Iraq) and Byzantine Greek (Syria) until Caliph Abdul Malik b. Marwan (r.a., 26-86AH/664-705) translated everything into Arabic. Given the conquests of Syria (634-638), Egypt (640-642), Iraq & Persia (642-644) and with later expansions, Indian, Persian and Greek works were saved from being lost, and were translated which would ultimately facilitate the transfer of Indian & Persian sciences to Europe: e.g. Arab-Indian or Western Arabic numerals - Persian scholar, Al-Khwarizmi (790-850), al-Jibr.

8. DEVELOPMENT OF ISLAMIC ECONOMIC THOUGHT - Translation (Cont). The impact on Muslim scholars of the translation of foreign ideas, especially Greek works depended on how they they reacted. Muhaddithunor ‘traditionalist’ scholars with a profound understanding of the hadith rejected Greek ideas maintaining that the Islamic heritage of knowledge was sufficient: for example, al-Farra (990-1066, Hanbali), al-Sarakhsi (d.1090, Hanafi), al-Kasani (d.1189, Hanafi). Mutakallimun or Islamic scholastic theologians, whom tried to distinguish what was acceptable and what was not, and where there was conflict, then tried to prove the supremacy of Islamic thought over Greek thought: for example, Al-Mawardi (974-1058, Shafi’i), Al-Ghazali (1058-1111, Shafi’i), Fakhr al-Din al-Razi (1149-1209, Shafi’i).

9. DEVELOPMENT OF ISLAMIC ECONOMIC THOUGHT - Translation (Cont). Hukama or ‘Muslims philosophers’ were deeply influenced by Greek ideas but went too far in support and propagating them: Ibn Sina (980-1037), ‘Avicenna’ in Latin texts - philosophy, medicine (Al-Qanun on medicine and al-Shifa on healing). Ibn al-Haytham (965-1039), ‘Alhazen’ - philosophy, mathematics, physics (optics). The hukama translated oikonomos as `ilm tadbir al-manzil (the knowledge of household management), being the first branch of Greek philosophy, the other two being ethics (‘ilm al-akhlaq) and politics (‘ilm al-siyasah). Additionally, Sufis or ahl al-tasawwuf preferred ascetic behaviour (zuhd), altruism and unselfishness, over material wealth, but later sufis denounced worldly means, preferring seclusion that reflected Hellenistic influences: Harith b. Asad al-Muhasibi (d.857) al-Junayd al-Baghdadi (d.910).

10. DEVELOPMENT OF ISLAMIC ECONOMIC THOUGHT - Transmission Transmission Period (6th-9th cent.AH / 12th-15th cent.): Islamic sciences in general and especially Muslim commentaries on Greek philosophy from Muslim philosophers (hukama) were mainly translated from Arabic into Latin, although not so the works of the traditionalists (muhadditun) give the conflict of religious ideas. Ibn Sina (‘Avicenna’, 980-1037), al-Farabi (‘Alpharabius’, 872-950), Ibn Bajjah (‘Avempace’, 1095-1138), Ibn Rushd (‘Averroes’, 1126-1198), Ibn Arabi (‘Doctor Maximus’, 1165-1240). Although, given the desire to prove religion had supremacy over philosophy, the Western religious scholastics (Thomas Aquinas, 1275-1274) did absorb the works of the Islamic scholastic theologians (mutakallimun) such as al-Ghazali (d.1111) and his Revival of the Religious Sciences (Ihya Ulum al-Din).

11. THE FIRST SPECIALIZED BOOKS ON ISLAMIC ECONOMICS The first books dealt with taxation, the land tax (kharaj) in terms of collection of revenues from conquered land and their distribution. Hence, kharaj is state revenue employed in public finance. Given the size and depth of Abu Yusuf’s work on al-Kharaj, it would be sufficient to assess his work rather than include the other three works as well. Abu Yusuf Yaqub b. Ibrahim Al-Ansari (731-798), Kitab al‐Kharaj Yahya b. Adam Al-Qarashi (757-818), Kitab al‐Kharaj Ibn Rajab al‐Hanbali (736-795), Al‐Istikhraj al-Ahkam al‐Kharaj Qudamah ibn Ja’far (864-932), Kitab al-Karaj “Abu Huraira reported Allah's Messenger (may peace be upon him) as saying: Iraq would withhold its dirhams and qafiz; Syria would withhold its mudd and dinar and Egypt would withhold its irdabb and dinar, and you would recoil to that position from where you started [repeated further the last part twice], the bones and the flesh of Abu Huraira would bear testimony to it.” (Muslim, 41:6923)

12. ABU YUSUF(113-182AH / 731-798) Abu Yusuf Yaqub ibn Ibrahim al-Ansari was a student of Abu Hanifah (d.767) who extended the influence of the Hanafi school of Islamic law through his writings and the government positions he held. He was appointed Qadi (judge) in Baghdad, Iraq, and later chief justice (qadi al-qudat) under Abbasid Caliph Harun al-Rashid (786-809), and it was the Caliph whom commissioned Abu Yusuf to write the Kitab al-Kharaj, being an issue of state concern requiring examination. The work was essentially the first treatise on economic policy, and provides a comprehensive discussion, as Abu Yusuf states, on “…the collection of the kharaj, ‘ushr (tithes), alms (zakat), jizyah and other matters of what [the Caliph] ought to do look into and act upon,” and the objective being to “avert oppression from his subjects, and benefit their interests” (Abu Yusuf, 1969:35)

13. ABU YUSUF (Cont.) Abu Yusuf did not just discuss kharaj, but in fact, also discussed expenditures & distribution of revenue, taxation (kharaj - tax on land, zakat (including ‘ushr - tax on crops) and other taxes such as jizyah, customs dues (‘ushur); public administration, law & order; other issues relating to leasing of land, public goods, prices, supply & value. Kharaj is a tax on conquered land, a system of rent, and was originally levied by Umar (r.a.) on the unit of land area (misahah) as a fixed tax (kharaj al-wazifah), e.g. for wheat it was fixed in cash and in kind at 1 qafiz + 1 mithqal dirham per jarib per year. The jarib is a surveyed unit of land measurement = 1,366 sqm. A qafiz is unit of measure for produce (one sa’) = abt 2kg of wheat. A mithqal dirham weighed 4.25g of pure silver (Abu Yusuf, 1969:107) When ‘Umar conquered Iraq he surveyed 36,000,000 jaribs for agriculture, and assessed the kharaj on them accordingly (Abu Ubayd, 2003:66).

14. ABU YUSUF (Cont.) Later under the Umayyads and early Abbasids, the fixed kharaj was taken in cash or in kind: when prices are low authorities preferred the kharaj in cash, and when prices high, the kharaj was preferred in kind, neither preferable to the farmer (Abu Yusuf, 1969:100) Hence, on taxation, Abu Yusuf recommended a proportional tax on agricultural produce, kharaj muqasamah, instead of a fixed levy (kharaj al-wazifah), as an incentive to bring more land into cultivation, reflecting what the land could bear. Abu Yusuf proposed the following proportional rates that reflected the level of labour and capital contributed, and paid in kind, unless by cash when the valuation agreed is just and not harmful to the farmer or the authorities: 40% of the produce if irrigated naturally by rain; 30% of the produce if artificially irrigated; 1/3rd of the produce of trees (palm trees, vineyards, orchards etc.); 1/4th of the produce from summer crops (Abu Yusuf, 1969:101)

15. ABU YUSUF (Cont.) He also advocated tax policies which favour the producer: where the kharaj would not apply below the nisab (5 wasqs) and if the yield fell below the threshold due to the farmer’s consumption, the tax would apply on the balance having deducted the amount consumed. And also a centralized tax administration to reduce corruption. He opposed tax farming land (qabalah) where land is accepted for kharaj and a tax farmer (mutaqabil) pays the ruler an agreed fixed amount of tax in grains, then collects taxes from the people and retains the difference. This was the privatization of tax collection, a tyrannical system, where any excess was riba al-fadl. He also emphasized the economic responsibilities of the ruler towards need fulfillment of his people and development, the need for justice and equity in taxation, and rulers’ duty to regard public money as a trust and be accountable for its expenditure. Abu Yusuf favoured the use of tax revenues for socio-economic infrastructure and included discussion of various types of taxes, including customs duties.

16. ABU YUSUF (Cont.) He made detailed suggestions on how to meet developmental expenditures on building bridges, dams and irrigation works. Though his chief contributions lie in the field of public finance. In terms of public finance, there was no deficit financing or borrowing since the central bank did not exist, and in any case not necessary given the prosperity and surplus funds in the bayt al-mal (Islahi, 2004:64). Hence no income tax to repay any national debt. He also rejected other policy measures such as price control, reaffirming that prices should be determined by market forces. On prices he observed:“Low prices are not caused by a surplus of crops nor high prices by the scarcity of them, but are from Allah. Sometimes there may be a surplus of crops and the price high, and sometimes there may be a scarcity and the price low” (Abu Yusuf, 1969:101). This does not necessarily contradict the price mechanism, if one considers value in exchange, where prices are a function of two ratios (the demand & supply of goods and the demand & supply of money).

17. IMAM MUHAMMAD AL-SHAYBANI(132-189AH / 750-804) Imam Abu Abdullah Muhammad b. al Hasan al-Shaybani was a student of Abu Hanifah (d.767) and after his death became one of Abu Yusuf’s followers - he was a Hanafi jurist and a judge. His “Book of Earning a Livelihood” (Kitab al-Kasb) dealt with an individual Muslim's micro-economic behaviour, was written on his own initiative, indicating that Islamic economics was developing an independent body of literature. He also wrote Kitab al-Asl which deals with fiqh mu’amalat: together with the works of Abu Yusuf they form the basis of Hanafi school of Islamic law. The style was traditional (athari) and juristic (fiqhi), and contrasts with Al-Dimashqi’s more pragmatic (‘amali) approach in Al-Isharah ila Mahasin al-Tijarah (The Guide to the Virtues of Commerce), but it certainly reflects the style of Al-Ghazali in his Ihya Ulum id-Din, in line with the Islamic world-view (ru’yat al-Islam li al-wujud) of combining the goal of worldly prosperity with that of the Hereafter.

18. AL-SHAYBANI (Cont.) He describes the appropriate behaviour in consumption and emphasizes the desirability of giving in charity on one hand and the undesirability of begging on the other. (Sect.41,42). He criticizes some sufis who reject economic enterprise (and beg instead), citing the Prophet (s.a.w.s) and the sahabah being engaged in trade as part of ibadah. (Sect.5,42). According to him one must earn enough to meet one’s own needs in moderation as well as spend on others, especially those whose financial support is obligatory, in particular one’s family (Sect.35,36,44).

19. AL-SHAYBANI (Cont.) He details four different types of earnings (anwa’ al-Makasib), stating that lowly earnings is permissible and agriculture is not at all reprehensible (Sect.17,18,19); Hired employment (al-ijarah) Commerce / trade (al-tijarah) Agriculture (al-zira’ah) Craftmanship / industry (sina’ah). However, he did warn about a narration from Abdullah ibn ‘Umar: “I heard the Apostle of Allah, (s.a.w.s) say: When you buy and sell on ‘inah (tabaya’tum bi al-’inah), hold the tails of oxen, are pleased with agriculture, and give up conducting jihad (struggle in the way of Allah). Allah will cause disgrace to prevail over you, and will not withdraw it until you return to your original religion” (Abu Dawud, 17:3455).

20. ABU ‘UTHMAN AL-JAHIZ(160-255AH / 776-869) Abu ‘Uthman ‘Amr ibn Bahr al-Jahiz al-Basri was born in Basrah where he flourished and also died. Baghdad, as the centre of world trade, was the seat of the ‘Abbasid caliphate at the time, and “Iraq was the eye of the world and Basra was the eye of Iraq”. Basra was at the confluence of the Euphrates and the Tigris, and was the door to Baghdad through which goods were traded; “Umar ibn al-Khattab (r.a.) called it the Dome of Islam” (al-Tunisi, cited by Seta, 2012:vi). Al-Jahiz wrote Kitab al-Tabassur bi al-Tijarah (The Book of Insight into Commerce) from the perspective of a merchant. Al-Jahiz’s pragmatic (‘amali) approach is similar to Al-Dimashqi’s more comprehensive manual for merchants, Al-Isharah ila Mahasin al-Tijarah (The Guide to the Virtues of Commerce).

21. AL-JAHIZ (Cont.) It mostly deals with different types of goods, their differing qualities, where they can be traded and contains an analysis on assaying gold and silver as money and the importance of intrinsic value (Ch.1). Al-Jahiz’s analysis of supply and demand extends that of Abu Yusuf:“Anything available in the market is cheap because of its availability (supply) and expensive by its lack of availability, if there is need (demand) for it” (Al-Jahiz, 2012:3),and that, “anything the supply of which increases, becomes cheap except intelligence, which becomes dearer when it increases” (Al-Jahiz, 2012:4). S2 P S1 A shift of the supply curve (S1-S2) due to a change in supply reduces Q and increases P A shift to the right from S1-S3 due to a change in supply increases Q and reduces P to a new equilibrium S3 P2 P1 P3 D1 Q Q2 Q1 Q3

22. AL-GHAZALI (451-505AH / 1058–1111) Abu Hamid Muhammad ibn Muhammad al-Ghazali was born and died in Tus, in Khorasan province of Persia. At 23 he studied in Nishapur, the capital of the Seljuks, and his tutor was Imam Al-Haramayn Al-Juwayni (1028-1085). At 33 he was appointed professor in charge of al-Nizamiyya university of Baghdad (est.1065), which became the model for all madrasahs and universities. He was a Sufi, a scholar belonging to the Shafi’i school of jurisprudence, and the associated with the Asharite school of theology, whose title was “Hujjatul Islam” (‘Proof of Islam’). He wrote many works on theology, sufism, philosophy, and jurisprudence, but much of his discussion on economic matters is found in his greatest work, his Ihya Ulum al-Din.

23. AL-GHAZALI (Cont.) Al-Ghazali classified knowledge (Bk.1) into fardu ‘ayn and fardu kifayah, categorizing the law of Islamic transactions (fiqh mu’amalat), as part of the religious sciences that is fardu ‘ayn, (compulsory on the individual): “To know the rules of Sharicah in these concerns is compulsory, as to search for knowledge is compulsory for every Muslim. It was reported that Omar used to visit the markets and instruct some inexperienced tradesmen by whipping them and say; ‘Nobody shall carry on business in our markets who has got no knowledge of business’.” Ihya, 2004, 2:52, Bk.13Kitab Adab al-Kasb wa al-Ma’ash (Book of the Ethics of Earning and Livelihood)

24. AL-GHAZALI (Cont.) Problem of barter and the need for money: “The creation of dirhams and dinarsis one of the blessings of Allah. They are stones having no intrinsic usufruct or utility, but all human beings need them....Allah (s.w.t.) has therefore, created dirhams and dinarsas judges and mediators between all commodities so that all objects of wealth are measured through them; and their being the measure of value of all commodities is based on the fact that they are not an objective in themselves…Allah has created them, so that they may be circulated between hands and act as a fair judge between different commodities and work as a medium to acquire other things. So, the one who owns them is as if he owns everything…A mirror, which has no colour, but it reflects all colours. The same is the case of money. It is not an objective in itself. But it is an instrument to lead to all objectives…He who does an act with dirhams and dinars, which is opposed to the above plan of Allah, commits a sin and is ungrateful to the gifts of Allah”and stressing also the need for indirect exchange“Barter system is not lawful as the good and bad of it are the same”. Ihya, 2004, 4:90-91,94, Bk.32Kitab al-Sabr wa’l-Shukr (Book of Patience and Gratefulness).

25. AL-GHAZALI (Cont.) Counterfeiting and debasement: “It is a great injustice to place counterfeited money in circulation. All those handling it are harmed…circulation of one counterfeit dirham is worse than stealing a thousand dirhams, for the act of stealing is one sin, ending once committed: but counterfeit money is something that affects many who use it in transactions for a long time.” “By zaif (alloy) we mean a coin that contains no silver at all, it is only polished; or dinars with no gold in them. If coins contain some silver but is mixed with copper and that is the authorized coin in the country, this is acceptable whether the silver content is known or not, but if it is not authorized, then it will be acceptable only if the silver content is known.” Ihya, 2004, 2:57-58, Bk.13Kitab Adab al-Kasb wa al-Ma’ash (Book of the Ethics of Earning and Livelihood) In other words, a counterfeit coin is one which has no gold or silver, if it does, it will only be accepted if the precious metal content is known or that an official (and thus trusted) coin is known for its intrinsic value.

26. AL-GHAZALI (Cont.) Hoarding, utensils and interest: “If instead of using dirhams and dinars someone buries them or hoards them for long, he does oppression to them and makes inoperative the object of Allah. Dirhams and dinars have not been created…but as a medium exchange of things…” Anyone who converts them into utensils of gold and silver acts contrary to the purpose for which they were created and is unlawful to Allah and commits sin. His condition is worse than that of the hoarder of money, for…the Prophet said: He who drinks in cups of gold or silver, enkindles as it were the fire of Hell in his belly [Bukhari 7:538]” “When someone is trading in dirhams and dinars themselves, he is making them as his goal, which is contrary to their functions. Money is not created to earn money, and doing so is a transgression. The two kinds of money are means to acquire other things; they are not meant for themselves.” Ihya, 2004, 4:91,94, Bk.32Kitab al-Sabr wa’l-Shukr (Book of Patience and Gratefulness).

27. AL-GHAZALI (Cont.) Earnings, trade and commerce, and profit “Earnings is not the aim of human life but it is a means to an end. There are three kinds of men: (1) one kind of man forgets the return and makes the earning of livelihood as the sole object of life. He is one who will be destroyed; (2) another kind of man makes his return to the next world as his sole object of life and remains busy in earning his livelihood therefore; (3) the third kind of man is near the middle path who keeps his goal of return to the next world as fixed and takes to trade and commerce for livelihood. He who does not adopt the straight path in earning a livelihood will not get the pleasure of the straight path. He who takes the world as the means of earning the next world adopts the rules and regulations of the Shari’ah in search of it and gets the pleasure of the straight path.” The prophet (s.a.w.s.) said “take to trade and commerce, because nine-tenths of the source of earnings is from trade and commerce” “Sale is for profit in a business and there is no profit unless a thing is charged more than the price by which it was bought. To take less profit is “ihsan” doing good, but to take greater profit is not unlawful” Ihya, 2004, 2:49-50,60, Bk.13Kitab Adab al-Kasb wa al-Ma’ash (Book of the Ethics of Earning and Livelihood)

28. AL-GHAZALI (Cont.) Consumption and consumer behaviour “The object of the wise is the vision of the Lord in the next world and the only way to gain it is learning and action and there is no other way, but it is not possible to stand constantly on them without a health body which is also not possible without food and drink, such food and drink which are absolutely necessary and which are taken according to prescribed rules” Ihya, 2004, 2:1, Bk.11Kitab Adab al-Akl (Book of the Manners Relating to Eating) “The sustenance of a number of the sahabah was no more than a sa’ of wheat every week. When they ate dates they sufficed themselves with one sa’ and a half. One sa’ of wheat is four mudds, so that each day they ate about half a mudd, a third of the stomach. A greater quantity was required in the case of dates because these contain pits which must be discarded. Abd Dharr (r.a.) used to day, ‘every week my food amounts to one sa’ of barley, in accordance with the usage of the Apostle of Allah (s.a.w.s.), and, by God, I shall not eat more until I meet him again!” Ihya, 2004, 3:87-87, Bk.23Kitab Kasr al-Shahwatayn (Book of Breaking the Two Desires)

29. IBN TAYMIYYAH (661-728H/1263-1328 AD) Shaykh al-Islam Taqi ud-Din Abu'l-Abbas Ahmad Ibn al-Halim ibn Abd al-Salam Ibn Taymiyyah al-Harrani  was born in Harran, and died in Damascus. He was a Hanbali jurist and by thirty years old he was offered the office of Chief Justice, but refused, as he could not persuade himself to follow the limitations imposed by the authorities. One of his major contributions was al-Hisba fi al-Islam (Public Duties in Islam) explaining its socio-economic functions, with a central theme of “commanding what is ma’ruf (good) and prohibiting what is munkar (evil)”.

30. IBN TAYMIYYAH (Cont.) Price Equivalent, Supply and Demand “If people are selling their goods in a fitting manner, causing no injury, and the current price happens to rise either because of the scarcity of an article or an account of increased demand, then is is a matter for Allah”(Ibn Taymiyyah,1992:35). Ibn Taymiyyah is referring to a thaman al-mithl (price of the equivalent) is a just price (thaman al-adl) free of injustice and determined by market forces. (Islahi, 1996:81,83). Price Control In the above circumstance, if the authorities fix the price (qimah al-mithl) or impose a price control, it would be unfair and distort the market; but if the supplier refrains from selling in anticipation of a higher price when those goods (such as food) are urgently needed, then“price control in such case is an undisputed duty. Its true nature is compulsion to sell or buy only for a fair price”(Ibn Taymiyyah, 1992:36)

31. IBN TAYMIYYAH (Cont.) Market imperfections In the case of monopolies or oligopolies, “such that foodstuffs or other goods are sold only to them and then retailed by them, any would-be competitor would be restrained rather harshly…In this situation prices must be controlled so that monopolists sell only for fair value…[if they] set their own prices the public would be injured (zulm) on two sides: the sellers wishing to sell those goods to them on one hand, and those purchasing from them on the other”(Ibn Taymiyyah, 1992:36). Agricultural arrangements and Muzara’ah (share-cropping) Ibn Taymiyyah regards the correct approach to share-cropping (muzara’ah) is a partnership rather than a form of leasing (ijarah), since one party is providing labour and the other property in the form of agricultural land, and thus both parties have a equitable arrangement in terms of profit, rather than a fixed rental(Ibn Taymiyyah, 1992:41). “The crop is a result of land that consists of soil, water, air, of the physical use of labour and of bullocks and means”(MFS, 29:103), i.e. the factors of production: land, labour and capital suggesting a cost of production theory of value, or is value reflected in its market price?

32. IBN TAYMIYYAH (Cont.) Hoarding Ibn Taymiyyah stipulates that in order to prevent hoarding, the authorities are entitled to compel people to sell their stocks for fair value (bi-qimat al-mithl) when they are urgently needed. So, for instance, if someone has food he does not need while people are starving he may be force to sell it to them for fair value. This is why the jurists hold that he who is in urgent need of another’s food may take it from him, regardless of his wishes, for fair value. Were he reluctant to sell except for more than the regular price, he would still be entitled only to this regular price” (Ibn Taymiyyah, 1992:32-33).Hence the consumer as well as the producer are protected against injustice. Provision of Essential Supplies In terms of production, essential items (food, clothing, housing) are required and that these industries are a collective obligation (fardu kifayah) on capable individuals in the community since public welfare is incomplete unless they are provided(Ibn Taymiyyah, 1992:37-38)

33. IBN TAYMIYYAH (Cont.) Fair Wage, Fair Price, Fair Profit As with a fair price, so Ibn Taymiyyah provides scenarios requiring a fair wage (ijrah al-mithl) in the labour market (tas’ir fi’l-a’mal) without inuring either party(Ibn Taymiyyah, 1992:43-45). And a seller should earn a just profit in an acceptable manner (al-ribh al-ma’ruf) without deceiving the people: the Prophet (s.a.w.s.) prohibited the townsman who knows the market price to act as middleman or agent for the nomad who does not(Ibn Taymiyyah, 1992:32-33, 56-57).

34. IBN TAYMIYYAH (Cont.) Ibn Taymiyyah's discusses public duties and the management of money, regulation of weights and measures, and anticipates Gresham’s Law (‘bad money drives out good’ in the presence of a bimetallic standard): “If the ruler cancels the use of a certain type of coin and mints another kind of money for the people, he will spoil the riches (amwal) which they possess, by decreasing their value as the old coins will now become merely a commodity. He will do injustice to them by depriving them of the higher values originally owned by them. Moreover, if the intrinsic value of coins are different it will become a source of profit for the wicked to collect the small (bad) coins and exchange them (for good money) and then they will take them to another country and shift the small (bad) money of that country (to this country). So (the value of) people’s goods will be damaged”(MFS 29:469, Islahi 1996:143).

35. IBN KHALDUN (732-808AH / 1332-1404) Abu Zayd ‘Abd al-Rahman ibn Muhammad ibn Khaldun Al-Hadrami was born in Tunis and deemed the father of economics. In 1377 he wrote on economic and political theory in the Muqaddimah (Introduction) of his History of the World (Kitab al-Ibar), and deals with history, culture, sociology, demography, economics, Islamic theology and political theory, indeed, he addresses the rise and fall of civilizations: for example, by discussing asabiyyah (social cohesion / tribal group), and explained how these social groups or dynasties would evolve and be replaced by others. Ibn Khaldun’s economic theory is contained in chapters 3, 4, and mostly ch.5 (sect.1-21). “Trade involves effort to earn and develop one’s capital by buying merchandise and cheaper, and selling them at higher, prices(Ibn Khaldun, 1958, 2:317)

36. IBN KHALDUN (Cont.) Determinants of supply and demand Ibn Khaldun introduced many new determinants of supply and demand and their influence on prices, including purchasing power of the community, tastes, composition of goods demanded and willingness to buy changes in the countryside and cities, in the beginning of a dynasty and at its advanced stage (Ibn Khaldun, 1958, 2:276-78). Supply is affected by hoarding, production and procurement costs, such as cost of rent, wages, duties, taxes on profits, risks attached to storage (2:339-40,341), profit expectations (2:301-02,351-52,367):“moderate profits boost trade whereas very low profits discourage traders and artisans and very high profits decrease demand”(2:340-01) the implication being the role of prices in the market and their influence on economic activities. (Islahi, 2004:30).

37. IBN KHALDUN (Cont.) Gold and silver served as a standard of value, a medium of exchange, and a store of value: “God created the two mineral stones gold and silver as the measure of value for all capital accumulations. Gold and silver are what the inhabitants of this world, by preference, consider treasure and property to consist of. Even if, under certain circumstances, other things are acquired, it is only for the purpose of ultimately obtaining gold and silver. All other things are subject to market fluctuations, from which gold and silver are exempt. They are the basis of profit, property and treasure” (Ibn Khaldun, 1958, 2:313). “A gold mithqal weighs seventy-two average-sized grains of barley (habbahs). Consequently, the dirham, which is seven-tenths of a mithqal, has a weight of fifty and two-fifths grains” (Ibn Khaldun, 1958, 2:58)

38. IBN KHALDUN (Cont.) Supply side economics (achieving economic growth through e.g. lowering taxation): “In the early stages of the state, taxes are light, but fetch in a large revenue; in the later stages taxation increases while the aggregate revenues falls off. This because the state, if it rests on a religious basis it will exact only dues provided for by the Shari’ah such as zakat, kharaj, jizya whose rates are low…and fixed…Now where taxes and imposts are light, private individuals are encouraged to engage freely in business….and as business prospers… the total yield of taxation grows. As time pass and kings succeed each other…they impose fresh taxes on their subjects…until taxation burdens the subjects and deprives them of their gains…businessmen are soon discouraged by the comparison of their profits with the burden of their taxes, and… production falls off, and with it the yield in taxation… From this you must understand that the most important factor for business prosperity is to lighten as much as possible the burden of taxation” (Ibn Khaldun, 1958, 2:89-91)

39. IBN KHALDUN (Cont.) Hence the concept known as the Khaldun-Laffer Curve This is the relationship between tax rates and tax revenue, which increases as tax rates increase for a while, but then the increases in tax rates begin to cause a decrease in tax revenues as the taxes impose too great a cost to producers in the economy.

40. IBN KHALDUN (Cont.) Economic growth “When civilization [population] increases, the available labour again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before. And so it goes with the second and third increase. All the additional labor serves luxury and wealth, in contrast to the original labour that served the necessity of life.” (Ibn Khaldun, 1958, 2:272-273) He notes that population growth, human capital development, and technological developments effect economic development, increasing economic surplus and trade.

41. IBN KHALDUN (Cont.) Division of labour and cooperation “When the prices of any type of goods…remains low, the merchant cannot profit… his profit and earnings stop if the situation continues for a long period” (Ibn Khaldun, 1958, 2:340-341),and the mutual interdependency and co-operation of individuals within society would be adversely affected. The implication being that co-operation and the economics of the division of labour are limited to the extent of the market. Labour Theory of Value? Ibn Khaldun insists that “profit is the value realized from labour”(1958, 2:272). At another occasion he says, “It should be further known that the capital a person earns and acquires, if resulting from a craft, is the value realized from his labour”(1958, 2:313); “it has, thus, become clear that gains and profits in their entirety or for most part, are value realized from human labour”(2:314). He did not state ‘exchange value’ but may have implied a labour theory of value, or is wealth a function of both capital and labour?

42. IBN KHALDUN (Cont.) Ibn Khaldun and economics Ibn Khaldun’s Muqaddimah may correctly be regarded as one of the best works in social, political and economic analysis in the Islamic tradition, offering insights into such subjects as division of labour, money and prices, production and distribution, international trade, capital formation and growth, trade cycles, poverty and prosperity, population, agriculture, industry and trade and issues relating to taxation and public expenditure.

43. AL-MAQRIZI(766-845AH / 1364-1442) Taqi al-Din Ahmad ibn Ali Al‐Maqrizi was trained as a Shafi’i, was a student of Ibn Khaldun (1331-1406), a prolific author, an historian. He served as the muhtasib (market supervisor) of Cairo under the Circassian Mamluks on three occasions in 1399, 1400 and 1405, the last appointment on the insistence of the sultan, Faraj (1399-1412). A hyper-inflationary depression brought on by debasement, corruption, famine and plague killed half the population of Egypt in 1404, and all of the livestock in 1405: Al-Maqrizi lost his only daughter during the crisis. Given his direct experience and knowledge in weights, measures and coinage, and monetary issues he wrote the Ighathat al‐Ummah bi-Kashf al‐Ghummah(Helping the Community by Examining the Causes of its Distress)completing it in Muharram 808AH / July 1405, as a warning to Muslims not to discard the Islamic currency of the dinar and dirham for fiat money (in the form of fulus), and reaffirmed their necessity in a subsequent work called an-Nuqud al-Islamiyyah (the Islamic currency).

44. AL-MAQRIZI (Cont.) Gold, silver and copper “The first to mint the dinar and dirham was Adam who said that life is not enjoyable without these two currencies”(al-Maqrizi, 1994:57) “[The people] should deal exclusively with gold and silver for pricing goods (Al-Maqrizi, 2004:80) “During the reign of al-Zahir Barquq (784-801/1382-99), the Ustadar Muhammad b. Ali was entrusted with the supervision of the royal treasury. He was greedy for profits and for accumulating wealth. Among his evil deeds was a large increase in the quantities of fulus (copper coins); he dispatched his men to Europe to import copper and secured the mint for himself in exchange for a sum of money. Under his administration fulus were minted at the Cairo mint. He also opened a mint in Alexandria for the purpose of striking fulus. Extremely large quantity of fulus came into the hands of people and they circulated so widely that they became the dominant currency in the country…This caused a catastrophe that rendered money useless and foodstuffs scarce…[the fulus] is an innovation and a calamity of recent origin …[which] led the population to privation and extinction”(Al-Maqrizi, 1994:71-72,77-79).

45. THANK YOU