Keynes’ Consumption Theory: A Reevaluation According to the Islamic Perspective

Abstract

Keynes Consumption Theory assumes that the household will increase its consumption if the income is increased and some of the income is saved. Although increased consumption will increase the household demand that can then contribute to economic growth, uncontrollable consumption increase spurred by increased income will lead to various negative implications, such as poverty, imbalanced income gap and deficit. The question is, does the household increase in consumption necessarily correlate with the increase in income? Next is, how does this theory square with the perspective of Islam particularly in terms of unused income? This paper carries two purposes. The first is that, it looks into Keynes’ consumption theory and the function of the household consumption based on Islam. Secondly, it analyzes the difference between Keynes’ consumption theory and the function of the Islamic consumption. The research for this paper relied on the qualitative approach using secondary data. The data were then analyzed using content analysis. The research outcome indicates that an increase in income does not automatically lead to an increase in consumption just as increase in consumption is not the direct result of income increase. Secondly, income increase provides for the opportunity to save and an opportunity to contribute to charity in the path of God rather than an increase in consumption. This is especially true for Muslim households.