Wealth Spending Research Articles

کیا رسول اللہ ﷺ نے زکواۃ ادا کی؟

Of the five fundamentals of Islam, Zakat occupies the second position. This word is derived from Zakd, which means it (a plant) grew. The second derivative of this word carries the sense of purification, e. g. Qad aflaha man zakkaha (he is indeed successful who purified himself). The other word used for zakat both in the Qur'an and the Hadith is sadaqa which is derived from sidq (the truth). Both these words are highly meaningful. The spending of wealth for the sake of Allah purifies the heart of man of the love of material wealth. The man who spends it offers that as a humble gift before the Lord and thus affirms the truth that nothing is dearer to him in life than the love of Allah and that he is full prepared to sacrifice everything for His sake. Secondly, zakat is the most effective measure to improve the economic condition of the have-nots. It is not, however, a mere tax, but a form of worship whereby a man comes close to his Lord. The Muslims have, therefore, been enjoined to pay zakat with the same sense of earnestness and devotion in which the seeker of the Lord observes the prayer.

A new paradigm: the wealth effect of the stock market on consumption, in a context of interacting bio-systems

This study examines the existence of a stock market wealth effect on aggregate private consumption in the economy. A theory of investor/consumer behavior is suggested, in a context of a symbiotic relationship between two quasi-bio-systems. The model offers predictions about likely outcomes in capital market interaction with the underlying economy in general and consumption in particular. These predictions are validated empirically. Specifically, the paper finds that investors/consumers do not respond immediately to a stock market rise (fall). Rather, they wait at first and thereafter gradually accelerate their ‘wealth spending’ on consumption only after they are convinced that the gain is permanent (a variation of the ‘income smoothing’ that was suggested many years ago by Friedman (1957)). The paper suggests that the capital markets and the economy interact like two bio-systems symbiotically responding to each other. This study presents evidence that the consumption wealth spending peaks at approximately 2.5% of the stock market wealth CUMULATIVE gain in the previous 12–24-month period, with some effects lingering on up to 36 months. For example, it shows that over 40% of the growth in consumer spending in 1999 was attributable to gains in the stock market in previous years, contributing to a strong GDP in that year.

A Behavioral Model of Stock Market Investors' Impact on Consumption

This paper offers a theory of investor/consumer behavior in the context of an adaptive relationship. It shows how consumer spending and stock market gains and losses interact in a "gradual diffusion" process. The model offers predictions about likely changes in investor behavior, and the impact on the underlying economy in general and consumption in particular. These predictions are validated empirically. Specifically, the paper finds that investors/consumers gradually smooth their "wealth spending" and accelerate consumption as they become more convinced that their gains are permanent. This is somewhat reminiscent of the "income smoothing" suggested by Friedman [1957]. We present evidence that the consumption wealth spending peaks at approximately 2.5%-3% of the stock market wealth cumulative gain in the previous twelve- to twenty-four-month period, while concurrent effects are negligible. The results also provide a partial explanation for the long cycle of a strong economy in the 1990s, and point out the danger to the economy from a prolonged stock market decline.

The road not taken: Friendship, consumerism, and happiness

Since the mid‐1960s in advanced and rapidly advancing economies, there has been a rising tide of clinical depression and dysphoria, a decline in mutual trust, and a loosening of social bonds. Most studies show that above a minimal level, income is irrelevant to one's sense of well‐being, but companionship and social support increase well‐being. Since shopping and consumption are increasingly solitary activities, and watching television is not genuinely sociable, the increased time devoted to these activities may be responsible for rising levels of depression. Advanced societies are likely to increase “utility” if they maximize friendship rather than the getting and spending of wealth.