Incentives and decision making ethical mechanisms: an Islamic exposition

Abstract

The wide spread moral decay which led to consecutive economic crises in the 21st century has led scholars to seek an ethical economic system. The Islamic economic system (IES), with its ethical foundations, is anticipated to rise as an alternative ethical economic system. The main pillars of this system have been established; however, little attention was given to the incentive and decision-making pillars under an IES. This paper aims to identify the incentive mechanisms that can be utilised to motivate individuals and guide decision-making processes under an ethical IES. Moreover, the paper introduces the 'mystic incentives' mechanism which addresses the spiritual aspects of humans. The use of the 'mystic' incentive among a mixture of materialistic and moral incentives is argued to have implications on both individual and organisational decision making. The paper contends that this mixture of incentives mitigates opportunity cost of choice, principal-agent and asymmetry of information problems.