A Note on Islamic Economics

1. A Note on Islamic Economics of Muslim scholars and fuqahá—to suggest that, provided the rules prescribed for market operations are observed, the profit motive should be ruled out. The Islamic vision of how markets are organized, operate, and clear is different from that of other systems: the physical analogue of that vision existed in remarkable uniformity in the Muslim world for centuries. These markets were physically structured to facilitate the workings of the Islamic rules governing market operations. Each product had its own specialized market, e.g., clothing, jewelry, house wares, food products, and raw materials. This concentration allowed the efficient flow of information, realization of economies of agglomeration, ease of supervision and quality control by guilds (±Éæ°UCG) and muhtasibs.28 However, it is important to note that, while markets exist and, indeed, are encouraged, an Islamic economy is not a market economy in the sense of neoclassical economic theory. Even though the Fundamental Theorems of the neoclassical economics allowed a limited role for the government to correct market failure, it is, by and large, the price system that rules the market economy. Through its rules of behavior for market participants, and without negating the signaling function of the price system in the market, the shari ah assigns a significant role to non-market decisions to ensure economic and social justice. This seems to be true in case of all pre- and post-market activities in terms of pre-production principles of property rights, in the case of the former, and through redistributive institutions, in the case of the latter. 19. If there is any validity in what has been said so far, investigations in the history of thought of Muslim and non-Muslim scholars, up to the time of the marginalist schools on the ontological and epistemological foundations of economic behavior, could be fruitful. This effort could provide, in turn, a rigorous foundation for analytic thinking in Islamic economics. Investigation in this area ties well with another field of research that can also prove a fertile ground for contribution to the development of Islamic economics, hermeneutics: a systematic, rigorous, and ’- analytic economic interpretation of sources of Islam, the Quran, the Sunnah of the Messenger º≪°SH ¬DBGH ¬«≪Y ˆG ≈≪°U , the economic history of early Islam and t writings of scholars and fuqahá. Because of the extreme sensitivity of this issue, particularly as it relates to the Quran and the Sunnah, it is essential to differentiate between what is meant here by hermeneutics and the generally understood notion of tafseer.29 Hermeneutics, as used here, does not mean tafseer, i.e., the first order interpretation of the sacred sources which is a highly specialized field, but rather the process of extracting economic meaning from the first order interpretation. 20. A simple example of what is meant by hermeneutics in the present context may help to clarify the difference. The Quran‘s declaration in Verse 276 of Chapter 2 that "... äÉBó°üDG »HôJH ÉHôDG ˆG ≥ëÁ ..." has a first order interpretation (tafseer) is primarily the responsibility of those specialized in the science of interpretation. However, an economist could understand this verse by relating the two future verbs "≥ëÁ" and "»HôJ" to the differential impact of "ÉHôDG" and "äÉBó°üDG" in the economy 18