Economic Foundations
Economists tell us that they are concerned with the redistribution of limited resources to meet unlimited demands.
That mantra defines and limits their scope towards a trade off between competing demands, a zero sum narrative that means that they expect and accept that some will be losers, but that at roots is not what makes a good trade.
A good trade occurs when two parties value what they have in their hand less that what the other holds. And more importantly in the making of the trade, they value what someone else holds more than what they hold
This is the basis of a barter system, that eixsted before a common unit of exchange came into the picture. And this means that both actually gain when they make the trade.
The barter system still exists alongside our monetary system in the discipline of brokerage, whereby a third party acts to bring together two such parties to make a mutually beneficial exchange between them.
So what did money add into this equation?
It made more efficient the ease with which you could sell your wares because at the point of sale you deferred the decision of what you needed to a later future date, and also because there was no direct trade between two parties each requiring the services of another, it meant that you could store up your capital for when you needed it more - and commensurately that in a World of fluctuating prices of things- that you could make a loss. This would happen when you would sell your wares more cheaply, because of ease, than if you would have in response to a broker approaching you (since the broker represents an already interested party).
It is in brokerage that you are guaranteed your fair price, however because brokerage requires mutual interest between exchanigng parties, it means that it essentially excludes not well differentiated or mass produced product.
The Messenger of God famously said to not go to the farmer before he had reached the market. Because farmers are in the business of not well differentiated products.
This also gives us the standard that each person has the right to gain their fair value, for their wares at trade.
Now look again at the foundations of Economic theory- that there are limited resources and unlimited demands.
First that there are limited resources.
In the 80s whilst schooling in London, part of our GCE Physics project was to look at efficiency savings with cars. We were constantly told that the gas and oil would run out within a decade. Today we have found more oil than we could ever have imagined beneath the Earth's crust. I am not here disputing the validity of being prudent with the use of resources, for the Messenger (saw) also told us to save water. And water is probably mans' greatest resource. But what I am disputing is the generality of the idea of a limited resource as being the defining conditions of an economic theory.
The second is that man is governed by desires that can be summed up as being unlimited in nature. Within that assumption is the seed that man cannot be truly happy unless their each desire is met, or at least has the opportunity of being met.
Now that this is starkly put out in the open. Ask yourself are you happiest when your each desire is met? The assumption therefore of economic theory which is the foundation stone of our society is that poor people are unhappy.
Whilst this is highly questionable, it gives you an idea of the type of society that economic theory would have us build, and do not be deluded it is not that it seeks a society that maximises happiness, but one that defines happiness in what you own, control or have.
Most definitely within the specifics of any situation there are competing demands for limited resources, but an economic theory that bases itself upon generalising that to define the society that we should all aspire to live under is a stretch that should be checked by scrutiny and not be allowed to cudgel us with fine words of science and rationality and math.
In the Islamic paradigm every discipline of action or thought is given by it’s purpose, because within that paradigm the whole of the cosmos is imbued within purpose.
The purpose of economics can be gauged by examining what it does:
1) The control of money, since Economists are in general directly or indirectly employed by the State (indirectly where they try to interpret the actions that the State has on the economic welfare of their employers/stakeholders), and their main means of control is through the supply of money either directly through printing it, or indirectly by setting base interest rates that determine the supply of money through investors choices, or by issuing bonds and thereby raising short term funds for the immediate needs of the state.
2) Justification of Choice. Whilst most economists would argue that they inform choice, the reverse is often more true, that they are used to justify choices already made.
3) To provide a benchmark through which to judge choices, based in the main on "regret" of not making optimal choices, in terms of economic gain that could have been had. In this instance reducing all actors' purposes to one of monetary gain over another, whilst ignoring multiple motives that govern choice.
4) To interpret or gauge market behaviour ahead of it coming to fruition. Von Newman and Morgensten in the Theory of Games provided a framework for judging optimal (monetary) strategy. And this then provides a justification for acting in such a way.
The idea then that economics is in the business of maximising man’s happiness is really at odds with what it does.
Within the Islamic paradigm the purpose of society is to reduce oppression to better free man so that he is better able to appreciate the majesty in which God, the Most Merciful, should be held.
When we allow economics to define our society then we allow it to enter into that sphere of our lives that defines who we as a people want to be, and we are the worse for it.
