Transcript Slide 1 - Arsip UII

A Note on Islamic Economics
17. Hicks has been quoted here extensively for two reasons: first, according to him,
it was the practice of bookkeeping that suggested the ‗rationality‘ concept and
the profit motive to the classical economists. Now, from the Eighth Century A.D.
onwards, Muslims succeeded in developing international trade and commerce on a
scale that surpassed anything known before. The greatest contribution of the Muslim
world to the Medieval economic life was arguably the development of commercial
methods based on writing and recording. Scholarship has demonstrated that the
system of commercial arithmetic and accounting was first introduced to Europe
in the book Liber Abaci by Leonardo Fibonacci or Leonardo Pisano in 1202 who
had learned the system from Muslims at Bougie in North Africa.24 If Bernardelli
is correct to suggest that Liber Abaci should be considered as the beginning of the
economic analysis, then the discipline, at least in part, owes its origin to Muslim
scholarship.25 Second, Hicks suggests that classical economics only needed the
rationality assumption in terms of ‗self-interest‘ and the profit motive to develop
the corpus of its ideas. Recent scholarship has questioned the ‗pure selfishness‘
attributed to Adam Smith‘s understanding of the ‗self-interest‘ motive. Given
the broad-based philosophical views of Adam Smith and, in particular, the depth
of thinking in the Theory of Moral Sentiments, the economic man, with pure
selfishness as his mover, seems too narrow and too one-dimensional to correspond
to the understanding of the ethical and moral concerns of Adam Smith, which
are so apparent in his writings and lectures. Moreover, it appears, even from the
passages quoted from Hicks, that there is no need to interpret ‗self-interest‘ as
‗pure selfishness‘ to justify the profit motive. Careful reading of the Theory of
Moral Sentiments and The Wealth of Nations seems to indicate that Smith‘s views
are based and focused on two characteristics that he postulated for human nature:
self-interest and the need for social cooperation, both of which he needs to explain
the workings of the market. A ‗pure selfishness‘ seems an unnecessarily strong
assumption for a theorist like Adam Smith with a moral/ethical orientation, on the
one hand, and belief in parsimony and Occam‘s Razor, on the other. 26
18. Considering Hick‘s very simple model of mercantile behavior, what motive could
be attributed to agents operating in an Islamic market? By the latter, it is meant
a market in which merchants have internalized Islamic injunctions and behave
according to the rules specified by the shari ah. An understanding of these rules
of behavior suggests that they are intended to ensure a level playing field for all
participants. A present-day understanding of these rules suggests that this is done
by prohibiting barriers to entry and exit and by encouraging the flow of free and
full information accomplished, in part, through prohibition of deliberate creation
of asymmetric information.27
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Assuming merchants observe all the rules of market behavior, would there be
any prohibition on the profit motive? While a Muslim merchant may have other
motives, there is no evidence—from the sacred sources, the economic history of
Medina during the lifetime of the Messenger º≪°SH ¬DBGH ¬«≪Y ˆG ≈≪°U , or the wr
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