Methodological Dimension Of Islamic Economics

Contents
Prologue
Preface
Basic explanations
Summary
Teaching philosophy
About the Author
Acknowledgment
List of Figures
List of Tables
1. How to Study Islamic Economics as a Science in Reference to the Quran and the Sunnah
Present state of the study of economics
Tawhid as the Islamic methodological worldview: the advent of Tawhidi Islamic Economics (TIE)
The nature of Islamic economics according to the Tawhidi episteme
Critique of axioms and assumptions of Islamic economics borrowed from mainstream economics
Optimization and equilibrium consequences of absence of economic rationality
For whom is this book appropriate?
Conclusion: How this book ought to be studied?
References
2. Tawhidi Islamic Economic Methodology
Methodology in occidental thought
Some examples to bring out the meaning of methodology in occidental thought
Analytical definition of methodology in occidental thought and the Islamic rebuttal
Islamic rebuttal of Kantian idea of rationalism
The impossibility to obtain unity of knowledge as the methodological core of scientific holism
Endogeneity, multi-causality, and unity of knowledge in scientific methodology
An example in occidental and Islamic methodological contrasts of socio-scientific meaning
Definitions: rationalism, mono-causality, multi-causality, organic relations, unity of knowledge, circular causation relations, continuity, reversibility
Reason via rationalism
Completion of reasoning
Rationality via reasoning and rationalism
Rationality derived from rationalism
Procedural rationality
Consequentialist rationality
The postulates of mainstream economic rationality contra knowledge-induced theory
David Hume’s a posteriori materialism in socio-scientific methodology
Summary of the occidental methodology in reference to Kant and Hume
In the end on rationalism, reason, and economic rationality
Other definitions
Unity of knowledge
Circular causation
Continuity and reversibility
Exercise 1
The Islamic monotheistic law as the methodological worldview contra Occidentalism
Methodological formulation of socio-scientific relations by Tawhidi analytics
Wellbeing function in the Islamic monotheism knowledge plane
Methodology and method
Pointwise identification of the postulates of Islamic socio-scientific (economic) rationality
Exercise 2
Conclusion
The foundational issues
References
3. The Scope of Tawhidi Islamic Economics (TIE)
The nature of morality and ethics in economic theory
Some necessary definitions
Morals and ethics
Exercise 1: In accordance with the verse of the Quran (2:275)
Interaction and integration
Example 1
Optimality and equilibrium
Utility and welfare
Example 2
Wellbeing function (maslaha)
The socially embedded economic problem
Exercise 2
Relational epistemology concept of ethics
Introducing the Tawhidi epistemology in developing the theory of financial economics
Finally, on the epistemological nature of TIE
What is TIE?
Understanding the knowledge, space, and time dimensions by the permanence of Tawhidi law
The nature of evolutionary equilibriums to be studied in Tawhidi Islamic financial economy a la Tawhid
The meaning of moral consciousness in TIE and science
An overview of the book
References
4. The Formulation of Islamic Economic Model
Example 1
Detailed formal model of Tawhidi consilience: Single system
Example 2
Exercise 1
Formulation of single-system Tawhidi epistemological model for unity of knowledge
The nature of microeconomics and macroeconomics in Tawhidi methodology
Exercise 2
Example 3
Extension of Islamic economic formulation to multi-systems
Multi-system model formulation: Islamic political economy contra mainstream political economy
Multi-system formulation of Tawhidi Islamic political economy
Exercise 3
Appendix
Assignment of θ-values for circular causation estimation/simulation
Exercise 4
Conclusion
References
5. Islamic Participatory Instruments and the Ethical Dimensions
Introduction
Background
Objective
Critical methodological issues of Islamic Economics and Finance
An example: Ambivalence of Tawhidi methodological goals in Islamic financing institutions
The inference derived from Islamic bank financing on the ethical front
Exercise 1
The principle of pervasive complementarities applied to Islamic financial instruments
The true nature of Islamic economic and financial studies
How do we get to the Tawhid methodological formulation from the imitative Islamic mainstream economic approach?
Example 1
A Tawhidi epistemological application to unified Islamic financing portfolio: PF Model
Exercise 2
Stakeholding and shareholding in the PF for purposes of risk and production diversifications
Exercise 3
FTFC in the PF formalism
Conclusion
References
6. The Dual Theories of Consumer Behavior and Markets
Exercise 1
Definitions
Exercise 2
Consumer preference and social preference formation according to Tawhidi circular causation theory
Formation of dynamic household preferences in TIE (Choudhury, 2011)
Formulation and explanation of a problem of consumer economic theory in TIE
Exercise 3
Contrasting the model of circular causation in TIE to utility maximization in mainstream consumer theory
Exercise 4
Formation of social preferences and implications
Formalism
Exercise 5
Demand functions
Market demand, market supply, and market equilibrium
The supply function
Specification of the supply function
Specifying supply function in multi-market
Market equilibrium
Abundance versus scarcity in TIE versus mainstream resource concepts
Exercise 6
Conclusion
References
7. Dual Theories of the Firm
Exercise 1
Non-viability of marginal productivity theory of wages in TIE
The TIE economics of resources in production
The shape of the average cost curves in TIE
Example
Exercise 2
Irrelevance of the marginal cost, marginal productivity, and returns to scale concepts in TIE
Exercise 3
The fallacy of economic efficiency concept in mainstream economics in light of TIE
Fallacies of mainstream economic theory in its first-order conditions of maximization objective functions
Perfect and imperfect competition in partial and general equilibriums of mainstream economics critiqued by TIE
Fallacy in the pricing theory of the firm in imperfect competition
Exercise 4
Irrelevant concept of value in mainstream economics of consumer and production theory
Welfare consequences of the market theory of consumption and production
The case of monopoly, monopolistic competition, and oligopoly with mainstream fallacies
Disintegrating monopoly in TIE
Diminishing monopolistic competition in TIE
Oligopolistic competition in TIE
Addressing dynamic market shares and industrial structure: Return to TIE methodology
Special case of oligopolistic generalization in determining prices and outputs with discursive effects, endogenous technology, and resources
Exercise 5
The concept of value in TIE
Exercise 6
Conclusion
References
8. Macroeconomic Theory in Mainstream and Tawhidi Islamic Economic (TIE) Perspectives
Nature of macroeconomic analysis
General flows of goods and services according to macroeconomics with ethical valuation
Exogenous effects in the GFGS
Endogenous effects of morality and ethicality in GFGS according to TIE
The income multiplier in the ethico-economic valuation process of GFGS according to TIE
Critical issues of consumption, savings, and investment functions
Exercise 1
Further extensions of the problems of sustainability of the Keynesian general equilibrium
The general equilibrium treatment of mainstream macroeconomics
Generalized system model of evolutionary ethico-economic equilibrium in TIE
The form of the generalized model of evolutionary system learning in aggregative TIE
Exercise 2
Exercise 3
Adverse effect of bank-savings on potential real output
The nature of the generalized system of evolutionary equilibrium model
The example of generalized system of evolutionary equilibrium model in the vector of variables, (θ, Z,Tr, y, r/i)[θ]
Exercise 4
Exercise 5
Conclusion
References
9. Monetary, Financial, and Real Economy Issues in TIE in Comparative Perspectives
Objective
Zero rate of interest: A necessary but not sufficient instrument for TIE
Capitalization of income flows and the rate of interest
The position of Islamic economics and finance in respect of capitalization of assets with interest-free instruments
The money, finance, and real economy (MFRE) relationships in an interest-free regime of socio-economic change
The circular causation between the central bank, commercial banks, and the real economy in the midst of MFRE relations
Case 1 of monetary mobilization: Perfect 100% RRMS
Case 2: Imperfect 100% RRMS with excess demand by commercial bank
Case 3: Lower demand for financing the real sector
Case 4: Resource leakages from the banking system under fractional reserve requirement
Central bank functions in 100% RRMS
The Laissez-faire concept of money and medium of exchange in the literature: Micromoney
The praxis of the Islamic approach to trade and interest relationship
Extending the arguments to the open economy case
Productivity-determined exchange rate in 100% RRMS with the gold standard
The functions of money in the 100% RRMS
So, what are the functions of monetary aggregate in such a system?
Money is not a store of value in TIE
Money is indeed a unit of value in exchange in TIE
Money is not necessarily a medium of exchange in TIE
In the end: Functions of money
Conclusion: Inferences on the Islamic alternative regarding global financial crisis
Exercise 1
Example
Exercise 2
References
10. Conclusion: What Have We Learnt? Quo Vadis?
The objective of this book is to expose the thoughtful student and the awakened Islamic scholar to the Tawhidi methodological worldview of TIE
The universe is the science of the signs of Allah in generalized manifestation of Tawhid
Economic science is a particular characterization of Tawhid as the law of consilience
According to the Quran, the universe of the known, the knowable, and the unknown, the unknowable comprise an extended economic venue
Socio-scientific thought is disabled in the absence of Tawhidi episteme of unity of knowledge
Teach and application: How is TIE different from existing “Islamic” economics?
Exercise 1
Final Thoughts
Example 1: Failure of studying social justice in mainstream economics and the alternative in TIE
The call to Islamic thinkers
References
Index