ISLAMIC ECONOMIC THOUGT

Islamic Economic Thought

The Prophet Muhammad (pbuh) told Muslims "seek knowledge, even if it be in China."

Origins of economic thought have been found in the writings of some prominent Islamic scholars, during the five centuries prior to the Latin Scholastics, who include St. Thomas Aquinas. During this period the Islamic civilization was one of the most fertile grounds for intellectual developments in various disciplines, including economics.

Early Muslim Economic Thinkers

¤Foundations and Development – First Phase (upto 1058)
¤Foundations and Development – Second Phase (from 1058 - 1446)
¤Foundations and Development – Third Phase (from 146 - 1932) • Current Phase

Early Muslim Economic Thinkers Al-Ghazali (1058–1111) classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static. Persian philosopher Nasir al-Din al-Tusi (1201-1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of his Ethics: "the study of universal laws governing the public interest (welfare?) in so far as they are directed, through cooperation, toward the optimal (perfection).

Many scholars trace the history of economic thought through the Muslim world, which was in a Golden Age from the 8th to 13th century and whose philosophy continued the work of the Greek and Hellenistic thinkers and came to influence Aquinas when Europe "rediscovered" Greek philosophy through Arabic translation.

A common theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth.

Persian leader Shams al-Mo'ali Abol-hasan Ghaboos ibn Wushmgir (Qabus) (died 1012) advises his son in the work Qabus nama: "My son, do not be indifferent to the acquisition of wealth. Assure yourself that everything you acquire shall be the best quality and is likely to give you pleasure." Persian philosopher Ibn Miskawayh (b. 1030) notes: "The creditor desires the well-being of the debtor in order to get his money back rather than because of his love for him. The debtor, on the other hand, does not take great interest in the creditor."

This view is in conflict with an idea Joseph Schumpeter called the great gap. The great gap thesis comes out of Schumpeter's 1954 History of Economic Analysis which discusses a break in economic thought during the five hundred year period between the decline of the Greco-Roman civilizations and the work of Thomas Aquinas (1225-1274).

However in 1964, Joseph Spengler's "Economic Thought of Islam: Ibn Khaldun" appeared in the journal Comparative Studies in Society and History and took a large step in bringing early Muslim scholars to the attention of the contemporary West.

The influence of earlier Greek and Hellenistic thought on the Muslim world began largely with Abbasid caliph al-Ma'mun, who sponsored the translation of Greek texts into Arabic in the 9th century by Syrian Christians in Baghdad. But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use deficit financing, use taxes to encourage production, the use of credit instruments for banking, including rudimentary savings and checking accounts, and contract law. Among the earliest Muslim economic thinkers was Abu Yusuf (731-798), a student of the founder of the Hanafi Sunni School of Islamic thought, Abu Hanifah.

Abu Yusuf was chief jurist for Abbasid Caliph Harun al-Rashid, for whom he wrote the Book of Taxation (Kitab al-Kharaj). This book outlined Abu Yusuf's ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tariffs.

Early discussion of the benefits of division of labor are included in the writings of Qabus, al-Ghazali, al-Farabi (873–950), Ibn Sina (Avicenna) (980–1037), Ibn Miskawayh, Nasir al-Din al-Tusi (1201–74), Ibn Khaldun (1332-1406), and Asaad Davani (b. 1444). Among them, the discussions included division of labor within households, societies, factories, and among nations.

Farabi notes that each society lacks at least some necessary resources, and thus an optimal society can only be achieved where domestic, regional, and international trade occur, and that such trade can be beneficial to all parties involved.

Ghazali was also noted for his subtle understanding of monetary theory and formulation of another version of Gresham's Law. The power of supply and demand was understood to some extent by various early Muslim scholars as well. Ibn Taymiyyah illustrates: "If desire for goods increases while its availability decreases, its price rises.

On the other hand, if availability of the good increases and the desire for it decreases, the price comes down." Ghazali suggests an early version of price inelasticity of demand for certain goods, and he and Ibn Miskawayh discuss equilibrium prices.

Other important Muslim scholars who wrote about economics include al-Mawardi (1075–1158), Ibn Taimiyah (1263–1328), and al-Maqrizi. 

THE FOUNDATIONS AND DEVELOPMENT – (upto 1058) First Phase
¤Zaid bin ‘Ali (d. 738 AD)
¤Imam Ja'far (d. 765)
¤Imam Abu Hanifa (d. 767 AD) 
¤Imam Malik (d. 795 AD)
¤Abu Yusuf (d. 798 AD)
¤Muhammad Bin Al-Hasan (d. 804 AD)
¤Imam Shafi'i (d. 820 AD)
¤Abu ‘Ubaid (d. 838 AD)
¤Imam Hanbal (d. 855 AD)
¤Harith Bin Asad Al-Muhasibi (d. 859 AD)
¤Junaid Baghdadi (d. 910 AD)
¤Mawardi (d. 1058 AD)
¤Ibn Miskawaih (d. 1030 AD)

THE FOUNDATIONS AND DEVELOPMENT – (1058 - 1446) The Second Phase

¤Al-Ghazali (d. 1111 AD)
¤Ibn Taimiyyah (d. 1328 AD)
¤Ibn Khaldun (d. 1404 AD)
¤Al-Maqrizi (d. 1441 AD)

THE FOUNDATIONS AND DEVELOPMENT – (1446 - 1932)
The Third Phase

¤Shah Wali Allah (d. 1762 AD)
¤Muhammad Iqbal (d. 1938 AD)

THE CURRENT PHASE
Islamic resurgence in economics and other social disciplines ¤Muhammad Baqir Al-Sadr,
¤M. Umer Chapra,
¤M. N. Siddiqi,
¤K. Ahmed among others.