This site is solely dedicated to publish my writing, mostly on the topic of Islamic finance. Some of the articles were written as partial fulfillment for completing the Chartered Islamic Finance Professional (CIFP) certifications and for the Ph.D in Islamic Finance that I am currently undertake. Interested parties, including reporter/press or students, may reproduce or quote materials published provided that the credit has to be given to my blog (arzim.blogspot.com). Comments must be accompanied by names or pseudonyms. Anonymous postings and those containing profanities and obscenities will be rejected.

Saturday, February 27, 2010

What are the underlying features of the neo classical model of economic thought? What worldview does it represent? How are they at cross purpose with the Islamic world view?

The economy is literally a social science that study the human behaviour given the scarcity of resources whilst wants are unlimited and the need to choose between competing alternatives. It is also studies the production, distribution, trade and consumption of goods and services. It can be said that the early economy thought started as a protest by Europeans towards Christianity orthodox school which has firmly grips them in every way. Such economists can be seen to be into political economy in their publication whereas be a neoclassical economy in other publication. This happens because the needs for anti-establishment during the period have led them to be secular in all way and to separate everything inclusive of economic activities with religion.

A neoclassical economic thought was founded by Adam Smith in The Wealth of Nations. The neoclassical economist adopted the ceteris paribus assumptions for ease of analysis. However, the simplification to assume all variables are remain constant, is primarily for the evaluation for short term analysis. On top of that, the Utilitarian philosophy has embedded into the neoclassical assumption premises for utility function to rank available choices from the best to worst and the agent will eventually choose the best-ranked choice in the feasible set of alternatives.  

Islamic economic is not an exact science. It combines Islamic theology concepts, thus, it becomes ideology or universal vision. What separates Islamic economics and neoclassical economic thought is Islamic economic is about Islam religion itself. The root of the thought is first, from Tawhid which is the complete submission of oneself to Allah. Second, is from the Risalah, the guidance from Al-Quran and of the Sunnah. The last one would be the Akhirah, the accountability of oneself in the hereafter. 

Islamic economic does not separate the the economy activities and religion. It represents the strength of both capitalism and socialism. It takes into accounts the moral factors which triggers the economy whereas the neoclassical only assume the unlimited wants in oneself. Furthermore, when neoclassical economic stand on the premise that the resources are in scarce, the Islamic economic believes the resources are in abundant and Allah urges human to seek the bounty. 

When neoclassical economic seen the efficiency is the virtue and paramount and one has decide between efficiency and equity, Islamic economic provides alternative way for efficiency and equity to be balance in the economy system. In Islamic economic, not excessive equality and freedom will achieve the equilibrium.

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