Method and Substance of Islamic Economics:Moving Where?

Abstract

Islamic economics started as a challenge and a fundamental critique of conventional economics, and the ambition of most Islamic economists of the first generation was the replacement of mainstream economics by a new paradigm based on or at least consistent with comprehensive Islamic worldview. It is questionable whether this goal has been achieved. A growing volume of literature with an ‘Islamic economics’ label follows the same quantitative approach and differs from mainstream only in so far as it deals with phenomena in Muslim countries, especially with aspects of Sharī‘ah-compliant banking and finance. Such studies of economic issues from an Islamic perspective are deeply rooted in conventional economics and lack the systemic or holistic dimension which is indispensable for the establishment of a new paradigm for a science of Islamic economics. Islamic economics as an autonomous discipline requires a systemic orientation, and it is conceptually inextricably linked with Islamic theology and law. However, the necessary intellectual interaction between economists and Sharī‘ah scholars is deficient. While Islamic economists had come forward with models of a financial system based on participatory modes of finance and widespread risk-sharing, many scholars of Islamic law were more concerned with the replication of conventional instruments for risk-free fixed-return transactions or with Sharī‘ah-compliant derivatives. Their efforts have moved Islamic finance closer to the conventional status quo and further away from an alternative system of financial intermediation. This did not contribute to the development of a new paradigm of Islamic economics, but this process is reversible