Changes Taking Place in Conventional Economics

Changes are, however, now taking place in conventional economics. Firstly, a multidimensional approach is gradually becoming accepted. Economists have now started introducing social, institutional, political, psychological and other variables in their analyses, following a practice that Ibn Khaldun adopted about 600 years ago. Secondly, in spite of the persistence of the secular philosophy in the discipline as a whole, the injection of a moral dimension into economics is being emphasized by a number of even renowned economists. It is being increasingly realized that allocation and distribution of resources is not determined by prices alone. It is also determined by moral values, which have a considerable influence on human behavior in general and on tastes and preferences in particular. Nobel Laureate Prof. Amertya Sen says in his book On Ethics and Economics that “the distancing of economics from ethics has impoverished Welfare Economics and also weakened the basis of a good deal of descriptive and predictive economics.”

The welfare state is also being rolled back because experience has shown that it is not possible for the government by itself to take care of all the needs of individuals in society. Any effort to do so is bound to put a heavy pressure on the government budget and lead to fiscal deficits and inflationary pressures. If the welfare state is rolled back, then who is going to take care of the needs of the poor and underprivileged? Even before the rolling back of the welfare state, there were a number of people who did not fall into the welfare net. Now there will be even more. How can a society meet the needs of such people? Islam has introduced the institution of zakat for this purpose. Zakat need not be spent only for meeting the basic needs of the poor and handicapped. It should also be used to enable them to stand on their own feet through education and the provision of seed finance for promoting self-employment.

M. Umer Chapra

Source: Essays on Muslims and the Challenges of Globalisation, Institute of Policy Studies, Islamabad. Republished with permission.