Applied Islamic Economics

A significant development during the last fifteen years has been empirical studies testing hypotheses based on the extant Islamic economic literature in the light of the corresponding reality.

Does a reality corresponding to Islamic economics exist in the present day world? The answer in the middle of the century would have been a categoric no. In fact some writers emphasized that the contemporary Muslim economic behavior, institutions and policies, especially government policies were deviating far away from Islam. To many, this implied that Islamic economics had no referent in the real world.

No longer so. Two things have changed the perception. A number of countries are trying to rid their economies of interest and to put in its place a financial system free from interest. Pakistan, Iran, Sudan all started doing so in early eighties. Malaysia, in the late eighties started erecting an interest free financial structure parallel to the conventional one. Some countries are also collecting and disbursing zakat.

Secondly, it is being realized that contemporary Muslim behavior is not all deviant. It is a mixed affair. Many Muslims try to follow the teachings of Islam as consumers, producers, employers, etc. There are also Islamic institutions which cannot be ignored, like the awqaf (charitable endowments). It would be fair to treat each case on merit so far as the Islamicity of government policies, role of social institutions and behavior of economic agents is concerned. A blanket rejection is not justified. It is also counter productive.

There is an upsurge in applied and empirical studies. Majority of subjects approved for writing doctoral dissertations now belong to this category, whereas not a single dissertation was written on such a subject in the earlier period. This is also an indicator of current research priorities. Operationalization of Islamic economics is getting more attention than mere description and adulation. Also the naive tendency to build models on assumption of exemplary ideal Islamic behavior on part of economic agents is being moderated by introducing middle level conformity and second best behavior.

Source: Dr. Muhammad Nejatullah Siddiqi, Economics An Islamic Approach. Republished with permission.