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Microeconomics: an Islamic approach

from Asad Zaman

At the heart of modern economic theory is the micro-economic model of homo economicus, who is cold, calculating and callous. This picture of humans as heartless rational robots is what leads to “Poisoning the Well: How Economic Theory damages our moral imagination” (Julie Nelson). I have provided a thorough critique of neoclassical utility theory in my paper:  The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature,” International Journal of Pluralism and Economics Education, Vol. 3, No. 4, 2012, pp. 366-414. However, as Thomas Kuhn noted, paradigms cannot be changed by critiques; they can only be changed by providing an alternative paradigm. Thus to oppose neoclassical utility theory, we need an alternative model for human behavior. For western theorists, a natural alternative is the secular humanist model, which allows for a wide range of cognitive and emotive functions not captured in economics. For my purposes, Islam provide a more relevant model of human beings as having spiritual, emotional and rational dimensions. This model speaks directly to my audience.

It is also true that, regardless of how we try, it is impossible to do economics without notions of morality, justice, equity and fair-play. Currently economics pretends to be positive, which means that it sneaks in very questionable (indeed, poisonous) value judgments (like that of Gauthier) into the framework, without explicit discussion. I have explained how the apparently objective concept of scarcity is actually built upon hidden foundations of three major value judgments about exogeneity of tastes, sacredness of property rights, and the idea that (unobservable) human welfare directly corresponds to  (observable) human choice behavior:; see  the normative foundations of scarcity.real-world economics review, issue no. 61. 22. Again to oppose neoclassical micro, we must introduce an alternative ethical and moral framework. Here again it suits my purpose and my audience to use an Islamic framework for this purpose.

Below, I provide a link to a summary of the first lecture I gave, in a unique course on Microeconomics.  read more

  1. October 11, 2017 at 4:16 pm


    I strongly urge a direct connection to your excellent lecture (https://asadzaman.net/am01-introduction/). I needed to go through two links to get there. Every concerned person should read what you have to say here.

    I would urge people to watch your video, but if westerners don’t have the time it may not only because they are trying to hold down as many jobs as the number of kids they raise. It’s because of our short attention spans.

    In the West, afflicted as we are with rampant narcissism, identity politics, and Islamophobic racism, I’m sure such a label as “Islamic Economics” will be greatly misunderstood, if not smeared or dismissed. Not your fault. But to encourage an embrace with what you are saying here, a different framing might be needed.

    I greatly appreciate the distinction you make between useful and harmful knowledge and the link to the era of Institutional Economics in the West early in the 20th century. By the 1960s, when I was trained as an economist, professors were overtly, intentionally, and routinely dismissing Institutional Economics as wrong and irrelevant, thereby trumpeting the technocracy of the Neoclassical ideology and killing the “dimension of character building, leadership training, recognition of social and civic responsibilities, development of spirit of service, sacrifice, and engagement with communities and world was lost in the West” (as you so well put it).

    Thank you for posting this lecture and the associated links. I am distributing this as widely as I can.

  2. October 12, 2017 at 2:28 am

    @Econoclast Thanks for the warmth of your remarks — I appreciated reading them. You are absolutely right that the framing I have used is not suitable for a western audience. If I was teaching in the USA or Europe, I would need to develop the material along different lines. However, for my audience here in Pakistan, and more generally the Islamic world, this framing works very efficiently and effectively. The fundamental rot at the heart of economics is a hopelessly bad model of human behavior, based on a hopelessly shallow understanding of what it means to be human. Once you recognize this, you find that we can easily make large strides in improving ANY economic theory by re-thinking it in context of REAL human beings, instead of rational robots. This gives me an ENORMOUS research agenda, which keeps me extremely busy. Currently, I don’t have time to do the re-framing required to make this material suitable for a western audience, but I would be happy to work with collaborators who wish to do so.

    • October 16, 2017 at 11:50 pm


      you say, “for my audience here in Pakistan, and more generally the Islamic world, this framing works very efficiently and effectively”
      excellent point, which i take to heart
      this reminds me of something black panther bobby seale said to us back in the 60s: “if you want to help, return to your tribe and work there”
      having worked professionally in the business of framing messages, headlines, etc., i’ll do just that to the extent of my abilities

      when i encounter, as i will, ignorant responses that the term (which i won’t use), “islamic economics”, is politically-correct identity politics i’ll respond with this, from your lecture:
      “This introductory lecture describes how Western approaches to knowledge are drastically different from Islamic approaches. In early 20th Century Western approaches matches Islamic approaches in that both aimed at the development of human beings. However, this dimension of character building, leadership training, recognition of social and civic responsibilities, development of spirit of service, sacrifice, and engagement with communities and world was lost in the West.”

      what you say here makes me want to thank thorstein veblen for his humanity and condemn my orthodox economics teachers for abandoning theirs
      i was explicity told in university, time and again, that institutional economics was, at least “irrelevant” and, worse, “wrong”

      if we are to construct a new economics paradigm it must address all the social functions of human beings, including “character building … engagement with the world” and be humble if the world of islam does it better
      because rugged individualism is a harmful and ignorant myth

      in any event i’m checking out reuben’s book (also via your review of it) and experiencing your lectures
      thanks so much

      • October 17, 2017 at 3:55 am

        Some of my work is addressed to, a secularized Western audience, and then is framed very differently, with no mention of Islamic roots of the ideas. For example, look at my lectures on “Spiriituality and Development” delivered to students in Development Studies at Cambridge University:

  3. Carl Butz
    October 13, 2017 at 9:19 pm

    OK, I followed the links. Yes, it is hard to unlearn things, even those things you’ve always known to be wrong. Being a student of economics in the late ’60s and early ’70s and arguing from an institutionalist and behavioralist perspective against the prevailing dogmas of my professors was useless. Do you want to graduate (and earn a living) or do you want to bang your head against a cement wall? I graduated.
    Anyway, now I am subscribed to Mr. Zaman’s newsletter.

  4. robert locke
    October 18, 2017 at 8:35 am

    ‘It is also true that, regardless of how we try, it is impossible to do economics without notions of morality, justice, equity and fair-play. Currently economics pretends to be positive, which means that it sneaks in very questionable (indeed, poisonous) value judgments (like that of Gauthier) into the framework, without explicit discussion,’

    Assad, if religion needs to be bought into economics in order to have morality, then why Islam, why not Christian Economics. I know that Islamic economics provides a moral base for economic activity, and have even written about it in the chapter, “US managerialism and business schools fail to find their moral compass,” of Confronting Managerialism: How the Business Elite and their Schools threw our live out of balance (2011), co-authored with J-C Spender, 67-71, but Christianity is just as well equipped, to discuss the moral dimension in economics as Islam, and has been doing so for a long time.

    I say this because we live in perilous times. I especially am aware of that because I live in a small German city on the border of Poland, where the anti-migrant movement is very strong. Every day when I walk in the park, I find immigrant Muslims there and Germans, not comingling as we would wish for the peace and harmony of the local community, but eyeing each other with suspicion that borders on hate. It is a social powder key, fed by the antimigrant party, AfD, which could easily explode, especially since neighboring Poland, Hungary, and Austria stridently oppose taking in Muslim migrants.

    If we want to use religion to introduce the ethical dimension into economics, use Christianity in these European communities as it has been done in the past, in Germany, for example, where the Catholics and Protestants churches joined with the secular social democrats to pass co-determination laws after the war in order to give employees in firms a voice in company governance.

  5. October 19, 2017 at 2:15 am

    @Robert Locke — your experience is probably that of people who have been bombed out of their homes and have been subjected to levels of trauma beyond your imagination. The general experience of travellers to Muslim lands is that of warmth and hospitality at levels beyond anything they have ever experienced in their own homelands.

    Anyway, I noted in my post that my approach is for my specific audience which is Muslim. For a European audience this approach would not be suitable, and instead a secular humanist approach would probably command much greater consensus. The main point is that economic theory is based on CONCEALED moral foundations; it pretends to be positive, but is highly normative, and based on poisonous norms to boot. To oppose it, one needs to expose these moral foundations, and to oppose them with an alternative framework; this moral framework may vary with societies — but we cannot succeed in opposing economic theory when both sides accept a concealed and drastically wrong moral framework. An example of this is the Cambridge Capital Controversy which was purely MORAL argument, in which NEITHER side said anything about morality. Karl Marx said the capitalists EXPLOIT laborers — a moral statement. Marginal Productivity theory says NO, both capital and labor get what they are worth, in terms of their contribution to production. Joan Robinson argued that the construction of capital was impossible, because assumption about the value of capital were built into this calculation — thereby implying that MP THeory is WRONG and that capitalists DO exploit laborers — Solow argued against this position, and in favor of the MP theory, again defending capitallism and capitalists. However, logical positivism says that morality does not exist, and cannot be part of science, so BOTH parties had to conceal their moral positions and moral arguments behind a wall of almost impenetrable mathematics, and NEVER explicitly state what the argument was really all about.

    I would be perfectly happy with a Christian Economics to be used in Europe — but there is an important warning to be noted — Christianity fought several ideological battles against the onslaught of modernity in Europe, but lost most of these battles, and as a result, made theological accommodation to what were once considered the deadly foes of Christianity. This history is available partly in Tawney — Religion and the Rise of Capitalism, and also in much more detail in Ernst Troelsch Protestantism and Progress. Christianty made friends with what was once its deadly foe: the appetitus divitiarum infinitus, the unbridled indulgence of the acquisitive appetite. Islam has not yet made these compromises, so its core principles are diametrically opposed to Economics along more than ten dimensions, as I have documented in my paper “Islam Versus Economics”:Chapter 2 in Handbook on Islam and Economic LIfe, edited by Kabir Hassan and Mervyn Lewis, Edward Elgar Press, (2015). Available from:

    • robert locke
      October 19, 2017 at 7:17 am

      Sorry Asad, I was talking about encounters in a park in a German city. My daughter is married to a Morrocan, and has very nice things to say about her treatment there when visiting her husband’s family in Morrocco.

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