Conventional Economics Research Articles

COVID-19 AS WAKE-UP CALL TO RECONSIDER THE MAINSTREAM FINANCIAL PRACTICES: ISLAMIC FINANCE PERSPECTIVE

This paper aims to present recommendations that can immune a conventional financial system against the global crisis, particularly the Covid-19 pandemic crisis from the lens of Islamic finance. This paper contends that Islamic finance is a relatively immune financial system comparing to the mainstream financial system by eliminating Riba and considering only asset-backed transactions as fruitful ones. This paper begins with the conceptual investigation of the literature on the principles of Islamic finance. The literature’s origins include primary sources (Quraan and hadith) and secondary sources (books, journals, and online resources). This paper is only conceptual and does not aim to examine the issues or theories empirically. The article will be useful to develop hypotheses for future research, especially in Islamic finance. Islamic concepts will of interest, especially for countries that adopt the conventional financial system. This paper will also be useful in the introduction for both Islamic and conventional finance practitioners alike. This paper provides a conceptual model to substitute the dominant conventional economics. Highlights the necessary steps to reconsider the conventional financial system. Islamic finance can mitigate the impact of COVID-19 on the economies mainly because of the PLS (profit-loss sharing) system and Islamic ethics in financial transactions. The paper shows its originality in substance and makes a unique contribution to the literature on systems and ethics by emphasizing Islamic finance practices approaching an effective alternative to conventional finance. Keywords: Islamic finance, mainstream finance, Covid-19JEL Classifications: G00, Y9

The Commons in an Age of Uncertainty: A Review Essay

AbstractFranklin Obeng‐Odoom's recent work offers an alternative to both conventional economics and to what he calls the "Western left consensus." Obeng‐Odoom's option involves placing justice at the center of policy regarding commons, not as a side note. Justice requires a focus on the land issue. This much is true, but Obeng‐Odoom ignores the plurality of views that are critical of the dominant political economy. A successful transition to a sustainable future will make use of many cultural and religious traditions working together.

Blue uncertainty: Warding off systemic risks in the Anthropocene—Lessons from COVID-19

COVID-19 has made evident the complex interdependence of social and ecological systems and that to reduce the risk of future zoonotic pandemics we must safeguard nature. Approaches based on complexity science taking into account that interdependence and its associated systemic risks must be mainstreamed in current policy making, in general. However, at present, that could result in failure for three main reasons: (1) those approaches might be too sophisticated for current policy making pursuing sustainable development; (2) the reductionist views from conventional economics still deeply influence economic and environmental policy making; (3) it is unlikely that far-reaching policies aimed at stimulating post-pandemic economic development can be steered through radically innovative approaches that remain untested. Here, using COVID-19 as an example, I suggest that the use of innovative complexity-based approaches could be enabled through intermediary approaches equipped to resonate with the mindset pervading current policy making.

Learning and teaching of Islamic economics: conventional approach or Tawhidi methodology

Purpose This paper aims to discuss the methodology of mainstream Islamic economics and also gives an alternative approach which is yet not very much taught in the different academic institutions, i.e. Tawhidi methodology. From the curriculum of the different academic institutions and also from the literature, it is observed that mainstream Islamic economics is the imitation of the conventional economics and mainly neoclassical economics. Maqasid-i-Shari’ah is not matching with the Tawhidi one. Design/methodology/approach It is based on the self-observations of the authors where they taught during their academic career. Findings This study found that the mainstream Islamic economics could not be able to solve the local and global issues because it is the replica of the conventional economics only there are some injunctions of Shari’ah. Research limitations/implications This study gives the guideline to the student of Islamic economics that how they will be able to understand the methodology of Islamic economics and finance. Practical implications It provides the guidance to the academicians and policymakers, especially those belonging to the Muslim countries. Social implications It also provides the glimpses to the social scientist about the solutions of the social and economic issues at the local and global levels. Originality/value It is an original effort.

Cyclical Fluctuation, Growth, and Stabilization: An Empirical Investigation of Dual Policy Objectives in Bangladesh

In conventional economics, two types of macroeconomic policy i.e. fiscal policy and monetary policy are used to streamline the business cycle. This paper has examined the cyclical behavior of these variables over the business cycle of Bangladesh. The objective of this examination is to show whether policies (fiscal policy and monetary policy) in Bangladesh are taken with a motive to stabilize the economy or only to promote economic growth. In other words, it has examined whether the policies in Bangladesh are procyclical or countercyclical or acyclical. Hodrick Prescott (HP) filter has been used to separate the cyclical component of considered variables. Both correlation and regression-based analysis have provided that in Bangladesh government expenditure and interest rates behave procyclically, but money supply behaves acyclically over the business cycle. Besides, this paper has tried to identify the long-term as well as the short-term relationship between real GDP and the macroeconomic policy variables with the help of the Johansen cointegration test, vector error correction model (VECM), and block exogeneity Wald test. Through these analyses, this study has found that fiscal policy has a significant impact on GDP growth both in the short-run and long-run. In the case of monetary policy, although the interest rate has an impact on real output both in the short-run and long-run, the money supply has neither a short-run nor long-run effect on output growth.

The 'True and Full' Opportunity Costs Of Non-Compliance For Regulated Entities

The scathing report of the American Congress in September 2020 on the Boeing 737 Max crashes and regulatory fiasco underlines the risks and dangers that result from governments and their regulatory authorities, regulated entities, the academic community and the media focusing solely on the business costs of regulatory compliance – while ignoring the costs of regulatory non-compliance for firms, the national economy and society. The purpose of the author’s research program and this working paper is to bring a behavioral economics lens to identifying the true and full opportunity costs of non-compliance by corporations and other regulated entities. The paper argues that the conventional economics, and law and economics, approaches badly underestimate the net economic and social benefits from compliance and the true and full opportunity costs of non-compliance with laws, regulations and social norms. These more conventional approaches do not meet the interests and requirements of: governments and their regulatory authorities, civil society groups, potential and actual victims, and the overall society and national economy. Most importantly, this narrow benefit-cost approach and related metrics fall far short of satisfying the longer term regulatory requirements of regulated entities and their senior executives, managers, and employees, their compliance and corporate social responsibility advisors and divisions, and their supply chain and other business partners. The working paper employs recent advances in the social psychology, behavioral economics, behavioral ethics, neuroscience, behavioral benefit-cost, and related less conventional economics literatures in order to identify twenty quite diverse but still interrelated sources and drivers of the true and full opportunity costs of non-compliance. These behaviorally informed sources and drivers are divided into three categories: (i) bounded rationality, cognitive scarcity, cognitive misers, and other system 1 attributes of the human brain; (ii) the financial, economic and social costs incurred and generated by non-compliant regulated entities; and, (iii) transaction, relationship and networking costs and related negative externalities. The paper as well offers proposals on how: (i) state and non-state regulators can apply these behavioral insights on the opportunity costs of non-compliance when designing, implementing and framing their enforcement, deterrence, compliance promotion, communication, outreach and other activities; (ii) regulated entities can employ these insights when designing and implementing their corporate strategies on innovation, product development, marketing, voluntary compliance, and corporate social responsibility; (iii) consumers associations, environmental groups and other civil society groups as well as the academic and consulting communities can employ these insights in their analytical, advisory and advocacy functions; and (iv) more principles and outcomes based, inclusive, polycentric and shared accountability regulatory, legal and policy regimes can make the true and full opportunity costs of non-compliance more vivid, tangible, salient, and actionable for regulated entities and all other regulatory actors.

On some alleged “problems” and alleged “solutions” in democratic firms

PurposeThis paper will discuss two problems that have plagued the literature on the Ward-Domar-Vanek labor-managed firm (LMF) model, the perverse supply response problem and the horizon problem. The paper also discusses the solution to the horizon problem and the alleged “solution” of a membership market.Design/methodology/approachThis is a conceptual paper so it analyzes the two problems and shows how they can be resolved. It also shows how one alleged “solution” (membership market) is based on several conceptual mistakes about the structure of rights in a democratic firm.FindingsThe perverse supply response is based on the assumption that the members of a democratic firm can expel for no cause some members when it would benefit the remaining members. It is shown that the same perverse behavior happens conceptually and historically in a conventional firm under the same assumptions. The horizon problem is resolved by the system of internal capital accounts (ICAs) that has been independently invented at least four times.Research limitations/implicationsThe idea of a democratic firm is quite often dismissed by conventional economists: “At first it seems like a good idea but unfortunately it is plagued by structural problems such as the perverse supply response and the horizon problem.” Hence it is important to see that the first is not a problem under ordinary assumptions and that the second is a solved problem.Practical implicationsThe perverse supply response problem can be reproduced in a conventional firm under similar assumptions, and the horizon problem is real problem for social or common ownership firms but is solved in the Mondragon-type worker cooperatives by the system of ICAs. This has been known and published since the early 1980s, but conventional economists ignore the solution and still cite it as an inherent structure problem of a democratic firm.Originality/valueIt has not been previously shown in the LMF literature that the perverse supply response can be reproduced in a conventional corporation under similar assumptions since the maximand for the conventional firm is not total market value but that value per current shareholder. The solution to the horizon problem using ICAs has long been “known” but never acknowledged in the conventional literature as if it was a necessary feature of workplace democracy. The idea of a membership market is analyzed and criticized.

The Concept and Role of Money in Modern Economy: An Islamic Perspective

Money has received a great deal of attention among Muslim jurists, because of its relevance to shariah issues such as zakat, usury, and sale, etc. These issues are definitely of great importance for all Muslims. This article proceeds with a discussion of classical concept of money as envisaged by early Muslim Jurists and their different point of views about the application of the term money. In second part, the concept and conditions of money according to modern Muslim Jurist and emergence of Islamic currency have been discussed. This part of the article also covers the comparative study of the role and functions of money in both conventional and Islamic economics system. The functions of money as discussed by the modern economists have been discussed by the early Muslim Jurists in detail. The last part of this study consists of the conclusion and findings of this article.

Citizen curation and the online communication of folk economics: the China collapse theory in Hong Kong social media

Folk economics has become increasingly influential in today’s era, where laypeople can (inter)actively deconstruct official discourse and form their truth in social media. This article examines the formation and popularization of folk economics by investigating the localized China collapse theory known as zhibao in one of the most influential online forums in Hong Kong. By analyzing the popularization of zhibao as citizen curation – the subjective and non-professional collection, assessment, and criticism of information by participants in online discussions for the benefit of the group – this article questions the dichotomy between folk economics and mainstream economics, arguing that laypeople may selectively appropriate conventional economics into their discourse. Furthermore, by investigating the citizen curation of zhibao diachronically, this article suggests that online discussion participants’ attention to the credibility of the news sources may be negatively related to the credibility of the discourse they are curating.

Hyperbolic Discounting is Rational: Valuing the Far Future with Uncertain Discount Rates

Conventional economics supposes that agents value the present vs. the future using an exponential discounting function. In contrast, experiments with animals and humans suggest that agents are better described as hyperbolic discounters, whose discount function decays much more slowly at large times, as a power law. This is generally regarded as being time inconsistent or irrational. We show that when agents cannot be sure of their own future one-period discount rates, then hyperbolic discounting can become rational and exponential discounting irrational. This has important implications for environmental economics, as it implies a much larger weight for the far future.

Islamic Economic Redefinition and its Methodology Among Contemporary Thinkers


 
 
 
 
 Abstract: The Islamic economic crisis from an epistemological perspective has been going on in recent years, based on many Islamic economic figures' writings. Monzer Kahf argues about Islamic economics's definition that there is no agreement among Muslim economists about the definition of Islamic economics, its scope, its relation to conventional economics, analytical methods and instruments, and even some of its basic assumptions. They view that the Islamic economy epistemologically still needs to be studied, while this Study, which has been going on for 40 years, seems to be running in place. In this Study, researchers used a library research method. This aims to reveal the redefinition of Islamic economics from contemporary economists, the methodological crisis that has hit Islamic economics, and the urgency of developing Islamic economics methodology among contemporary thinkers. The essence of the urgency of developing methodologies and approaches in Islamic economics is tawhid. The central or core concept that permeates all aspects of the epistemology of Islamic economics is tawhid. Tawhîd is the essence of Islam; tawhîd is considered the unity of knowledge and can be broken down into sources, methods and scientific knowledge. Knowledge comes from Allah's revelations to His Prophet, and reasoning, perception, and empiricism. Because of al-Attas, God's first type of knowledge is through direct revelation. The second is through the speculation of rational investigations based on his experience of the plausible and understandable.
 
 
 
 

Неравенствата – между либералната доктрина и кейнсианската направлявана икономика на условностите

The increase in inequalities over the last thirty years has been supported by the statements of liberal economic thought. According to liberalists, economic inequality is a necessary condition to achieve the objectives of economic growth and market efficiency. The failure of the Efficient-market hypothesis, with the financial crisis of 2007, brings forth the need to reconsider the theoretical basis of perfect individual rationality, taking into account more realistic models of individuals with limited rationality. This is how the role of conventions in decision making comes into play, and more specifically the chapter twelve of Keynes’ General Theory, through the analysis of anticipations in condition of uncertainty, where the conventional nature of the investment decision is highlighted. But the Keynesian convention is insufficient to better explain how financial markets operate, when the convention is lacking. Thus, the present paper proposes a review of the “Keynesian conventional economy”, updating it in the “oriented conventional economics”.

Development Paradigm for Ecological Civilization and Reform of Economics Theory Towards Ecological Development

In the context of integrating the ecological development into all aspects and the whole process of economic, political, cultural and social development, and striving to create a new era of China’s socialist ecological civilization, one important aspect is that we need to construct a paradigm transformation theory for the development of ecological civilization. In establishing theories for the paradigm of ecological development, what we need most is an economic theory. However, the problem is that traditional and conventional economics, including political economics, cannot provide theoretical and methodological support for the current ecological development in China or even the world. Based on the concept, cognition and China’s practice of ecological civilization, the author reflects on the economic theory and its development direction in future.

A rational irrationality: Reviewing the Concept of Rationality in Conventional Economics and Islamic Economics

In analyzing economic phenomena that occur in the midst of society, economists always use assumptions. Rationality is the most important assumption and becomes the main step in analyzing the phenomenon. Individuals in making decisions are assumed to be rational. Problems arise when rational human measurements for the economy of the classical generation are selfish and tend to be selfish. This article discusses how the assumption of rationality is debated among the three major streams of economics today. The three streams referred to are Classical-Neoclassical Economist, Behavioral Economist, and Islamic Economist. Neoclassical-Economist with the assumption that rational individuals are individuals who are concerned with personal desires, Economists of Behavior with the theory of Bounded-Rationality, and Islamic Economists with the argument that the main goal of humans is God.

The Role of Entropy in the Development of Economics.

The aim of this paper is to examine the role of thermodynamics, and in particular, entropy, for the development of economics within the last 150 years. The use of entropy has not only led to a significant increase in economic knowledge, but also to the emergence of such scientific disciplines as econophysics, complexity economics and quantum economics. Nowadays, an interesting phenomenon can be observed; namely, that rapid progress in economics is being made outside the mainstream. The first significant achievement was the emergence of entropy economics in the early 1970s, which introduced the second law of thermodynamics to considerations regarding production processes. In this way, not only was ecological economics born but also an entropy-based econometric approach developed. This paper shows that non-extensive cross-entropy econometrics is a valuable complement to traditional econometrics as it explains phenomena based on power-law probability distribution and enables econometric model estimation for non-ergodic ill-behaved (troublesome) inverse problems. Furthermore, the entropy economics has accelerated the emergence of modern econophysics and complexity economics. These new directions of research have led to many interesting discoveries that usually contradict the claims of conventional economics. Econophysics has questioned the efficient market hypothesis, while complexity economics has shown that markets and economies function best near the edge of chaos. Quantum economics has already appeared on the horizon, which recognizes money as a fundamental measurement device in the economy. The development of these sciences may indicate the need to reformulate all mainstream economics from its foundations.

الاقتصاد ومعلمة التقوى ودور البيانات الضخمة (Economics, Taqwa Parameter and the Role of Big Data)

Arabic abstract: تحاول هذه الورقة تبسيط الفرق بين الاقتصاد الإسلامي والتقليدي، بلغة سهلة يمكن للمثقفين وصناع القرار على اختلاف تخصصاتهم استيعابها. كما يمكن للباحثين في الاقتصاد الإسلامي استخدامها في بناء النماذج الاقتصادية وتحليل نتائجها. وذلك من خلال إبراز دور معلمة التقوى، واقتراح طرق لتقدير قيمتها في مجتمع مسلم. ثم تستعرض الورقة بعد ذلك أثر توافر كميات ضخمة من البيانات على البحوث الاقتصادية وتطوير النظريات الاقتصادية، والفرص الهائلة التي تتيحها هذه البيانات لتطوير البحوث التطبيقية في الاقتصاد الإسلامي في حال نجاحها في استحداث مؤشر مقبول لقياس معلمة التقوى في المجتمع. English abstract: This paper attempts to simplify the difference between Islamic and conventional economics using a simple approach that can be easily understood by intellectuals and decision makers. The paper highlights the role of taqwa parameter that can be utilized by researchers in Islamic economics to build economic models and analyze their results. The paper also suggests ways to estimate the value of taqwa parameter in a Muslim society. The paper then reviews the impact of the availability of big data on applied economic research and the testing economic theories, and the tremendous opportunities that big data provide for the development of applied research in the Islamic economics if we succeed in developing an acceptable index to measure taqwa parameter in Muslim societies.

Biophysical Economics for Policy and Teaching: Mexico as an Example

Many parts of the world are currently facing unprecedented social turmoil. Few understand that most of these “exploding” situations have a biophysical basis in patterns of consumption and the ratio of number of humans to resources available. Most “solutions” proposed are political oppression or, for the lucky, economic development, usually led by conventional economists. However, we believe that, for many regions, conventional economics, certainly alone and perhaps in their entirety, are not up to the job of addressing these crises. We propose a new discipline, Biophysical Economics, that addresses these lacunae and offers a good set of procedures for bringing much more natural science to the discipline of economics. This approach provides a stronger basis for training young people in both economics and heterodox political economy. We will need economists with this new training for a future that appears very different from today. This article outlines the rationales for further developing and teaching Biophysical Economics to demonstrate its utility and applies this economic lens to the economy of Mexico. We finish by providing an example of how a Biophysical Economics curriculum appropriate to analyzing and addressing the Mexican economic context might be developed and taught at the University of Guadalajara. This curriculum could also be adapted to other national, educational and institutional settings.

PENGUNGKAPAN TANGGUNG JAWAB SOSIAL PERUSAHAAN SYARIAH (ISLAMIC SOCIAL REPORTING)

The concept of corporate social responsibility (CSR) is now not only developing conventional economics, but also in the Islamic economy. The concept of CSR in Islam is Islamic Social Reporting, which is a special framework for reporting social responsibility in accordance with Islamic principles. The framework is not only useful for Muslim decision makers, but also useful for helping Islamic companies in fulfilling obligations towards Allah SWT and society. This writing method used literature review through various literature with the aim of informing the reader (informative research) about the themes in social responsibility disclosure in sharia-based companies.

How Much Justice Can You Afford

It is one of the oldest lawyer jokes in the book, and its punchline is about to change. Remember the New Yorker cartoon, in which a lawyer and the client sit at a table, and the lawyer assesses the client's legal problem? You have a pretty good case, the lawyer informs him. How much justice can you afford? the client's response is unvoiced in the cartoon, but moving beyond the punchline, one can imagine the client's heart sinking, realizing that he may not be able to afford all the justice he needs, or any justice at all. This reflects the day-to-day reality of most people in the United States and around the world: the justice they can afford is not the justice they need. That, too, is about to change as Online Dispute Resolution offers an affordable justice option for litigants who have been denied access to justice because they could not afford the cost of lawyers. In this article, we discuss ODR, its goals and implementation in the court system, and the ways in which it shakes up some of the conventional economics and practices of the legal services market.

Why realism and methodological pluralism matter for robust research and public policy: perspectives from behavioural economics

Conventional economics maintains that a critical test of the veracity of robust economic theory is its capacity to generate plausible economic predictions, irrespective of the realism of the theories' underlying assumptions. This methodological argument even holds for relatively less conventional approaches to economics such as behavioural, heterodox, experimental, and institutional. Following upon research in behavioural economics, I argue that such a methodology can easily result in the illusion of causality, the omission of potentially key variables, and closing the doors to key analytical questions as well as to publication bias. This generate perverse analytical results, with severe consequence for public policy. I argue that methodological pluralism is critical to the construction of robust economic theory, irrespective of ones' political orientation. Examples are drawn from financial markets, labour markets, and macroeconomics to illustrate this pluralistic perspective to economic analyses.