Transcript Slide 1 - Arsip UII

A Note on Islamic Economics
No. 2, Spring 2002 (pp. 23-46). On contract theory, see L. Werin and H. Wijkander,
editors: Contract Economics
, Basil Blackwell, Oxford, 1992. See also ―Financial Risk
and the Burdens of Contracts‖ by Herman B. Leonard and Richard J. Zeckhauser in
American economic review, May 1985 (pp. 375-380). On the importance of contract
and governance in Islam, see ―The Muslim Ruler and Contractual Obligations‖ by
Anderson and Coulson, New York University, Law Review, Vol. 33, No. 7, Nov.
1958. Given the importance of contracts as a crucial institution in Islamic thought,
analysis of their formation is critical to the understanding of their role as is the
analysis of the Islamic behavioral assumptions prior to their formation. Contrasting
this understanding with that from the rational choice theory that assumes preferences
are given exogenously, and that parties to a contract maximize their expected utility,
could provide valuable insights. It is worth noting that the literature on law and
economics operationalizes the maximization of expected utilities by assuming that,
while negotiating and forming contracts, parties will act to maximize their expected
wealth. Behavioral and experimental economics attempts to modify the exogenity
assumption by considering the possibility of endogenous formation of preferences.
See, for example, Pussell Korobkin “Behavioral Economics, Contract Formation,
and Contract Law‖ in Behavioral Law and Economics
, edited by Cass R. Sunstein;
Cambridge University Press 2000 (pp. 116–143). In Islam, while ‗justice‘ is the
criterion of relationships between Allah and man, between man and man, between
man and nature, contracts are the means of establishing these relationships. See Tariq
Ramadan Western Muslims and the Future of Islam , Oxford University Press, 2004
(especially pp. 89-94; pp. 151-153; and pp. 179-199). On the institution of contracts
in Islam from a legal point of view see P. Nicholas Kourides ―The Influence of Islamic
Law on Contemporary Middle Eastern Legal System: the Foundation and Binding
Force of Contracts‖ in Columbia Journal of Transnational Law, Vol. 9, No. 2, 1970,
(pp. 384-435).
trust, see P. Dasgupta; ―Trust as a Commodity;‖ Economic Theory Discussion
Paper (No. 101), University of Cambridge, April 1986. See also Professor Ali Khan‘ s
paper ―On Trust as a Commodity and on the Grammar of Trust,‖ in Journal of Banking
and Finance, 26, 2002 (pp. 1719-1766). On trustworthiness see ―Evolutionary Norm
Enforcement‖ by Werner Güth and Axel Ockenfels, Journal of institutional and
theoretical economics, Vol. 156, 2000 (pp. 335-347). On commitments, promising and
trust see Michael H. Robins, Promising, Intending, and Moral Autonomy, Cambridge
University Press, 1984. On reciprocity, see ―Fairness and Retaliation: The Economics
of Reciprocity‖ by Ernst Fehr and Simon Gächter in the Journal of Economic
Perspective, Vol. 14, No. 3, summer 2000, (pp. 159-181), in which they argue that
―... a sizable portion of economic actors act on considerations of reciprocity.‖ Also
provide evidence that ―strongly suggests that reciprocity substantially contributes to
the enforcement of contracts‖ (p. 170).
20 On
See Hoffman, McCabe and Smith, ―Behavioral Foundation of Reciprocity: Experimental
Economics and Evolutionary Psychology‖ in Economic Inquiry, Vol. 36, July 1998
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