In the name of Allah(J.

J)

Chapter # 1

Introduction to
Islamic Economics

Prepared by: Kokab Manzoor

 Areas of Discussion

Emergence of Islamic Economics

Some Renowned Muslim Economist
Definition of Islamic Economics
Its objectives, Principles and Features
Islamic versus Conventional
Economics
Sources of Islamic Economics
Moral Values & Economic System of
Islam
EMERGENCE OF
ISLAMIC ECONOMICS
Economics is not a very old science.
Islamic Economics is even younger.
Attention to Islamic economic system
was diverted from Islamic banking and
financial system.
The contributions of Muslim thinkers and
philosophers have usually been
neglected in the history of Economics.
Cont`d.
Western scholars regard Adam Smith as
Father of Economics and his famous book
Wealth of Nations (1776 A.D) as the first book
of economics BUT Five centuries before
Adam Smith we find elaborated discussion on
economics under the topic Tadbir-i- Manzil
( planning of house), Siyasat-i-madan
(politics of city) and AL Muash (Livelihood) in
the works of Muslim scholars especially
Muhammad bin Hassan Tusi (1274 AD) and
Ibn e Khaldun (1332-1406 AD)

5
Some Renowned Muslim Economist
Many scholars trace the history of economic thought
through the Muslim world, which was in a Golden
age from the 8th to 13th century

Abu Yusuf (731-798) wrote the Book of Taxation

(Kitab al-Kharaj).
This book outlined Abu Yusuf's ideas on taxation,
public finance, and agricultural production.
Tahir ibn al Hsssain (755 822)
Al-Ghazali (10581111)
Al-mawardi (10751158),
Nasir al-Din al-Tusi (12011274)
Ibn Taimiyah (12631328),
 Contribution of other Muslim
Economists
The discussions included division of labor within
households, societies, factories, and among
nations.
Ibn e Tammiya illustrates the concept of
Demand and supply.

The concept of benefits of division of Labor was

also dicsussed by Al Farabi (873950), Ibn e
Sina (9801037), Nasir Al Din al Tusi (1201
1274), Ibn Khaldun (13321406).
The most well known Islamic scholar
who wrote about economics was Ibn
Khaldun of Tunis, who is considered a
forerunner of modern economics.

Lets have a bird eye view on his

remarkable work.
Ibn Khaldun (1332-1406 AD)
Father of Economics
Abdal-Rahman Ibn Mohammad Ibn Khaldun
was born in Tunis.
He worked as Judge & Head of Al-Azhar
University Cairo, Egypt (worlds oldest university -
founded 971 AD)
His major areas of work.
Labor Theory of Value,
Labor Economics ; Labor as the Source of
Growth and Capital Accumulation.

Demand, Supply, Prices & Profits

Modern price theory states that cost is the
backbone of supply theory, it was IBN-
KHALDUN who first examined
analytically the role of cost of production
on supply and prices.
Cont`d
And it was Ibn khaldun NOT Frank
Knight, who originally advanced the
theory of profit.

He also concluded that both excessively

low prices and excessively high prices are
disruptive to markets.
In fact he discovered what is now known
as cost push and demand pull inflation.
Cont`d
Macro Economics, Growth, taxes, role of
government, and Money
Expenditure of one citizen are income to
others this equality was first introduced by
Ibn-e-Khaldun.
He was the pioneer in introducing the
theory of Growth based on capital
accumulation
Ibn-e-Khaldun was the first major
contributor to theory of Taxation in the
history.
Cont`d
Foreign Trade
He also contributed a lot in the field of
International Economics.
Ibe khaldun was of the view the people`s
satisfaction, merchant`s profit and
countries wealth, all these will increase
through foreign trade.

He also introduced the concept of

opportunity cost
Conclusion
His analysis on theory of capital accumulation,
value and its relationship to labor, dynamics of
demand, supply, prices & profits; his treatment
of the subjects of money and role of
government; his remarkable theory of taxation,
and other economics subjects; his all this
unprecedented contribution to the overall field
of economics make

IBN KHALDUN , THE FATHER OF

ECONOMICS
Definition of Islamic Economics

Islamic economics is a social science

which studies the economic problems of
a people imbued (inspired) with the
values of Islam (Mannan)

Islamic economics is a science that

studies the allocations of resources to
create and distribute wealth for mankind
and universe for the purpose of returning
(worshipping) to Allah (j.j).
The Objectives of Islamic
Economics

Economics stability for individual, society

and country
Optimum Resource Usage
Fair distribution of wealth
Uphold individual freedom
Equal rights and opportunities
Justice and cooperation
Basic principles of Islamic
Economics
Individual liberty
Right to property
Economic inequality with natural limits
Social equality
Social security
Prohibition of accumulation of wealth to
certain group
Prohibition of anti-social institutions
Social and individual welfare
Two Concepts of life

1 Materialistic concept of life

2 Moral concept of life

18
1 Materialistic concept of life

The materialistic concept of life views Man

as an animal whose sole subject is to
satisfy physical needs.
This concept of life naturally and logically
leads to an individuals approach to life.
The feudal system of the middle ages in
Europe, Modern Capitalism and
Communism are all products of
materialistic approach.

19
2 Moral concept of life
According to this view the universe has
been created by Almighty Allah.

Man is not an animal rather he is a

vicegerent ( ) of the Lord of the
universe.

Man should subordinate all his actions in

every phase of life to Almighty Allah

20
Cont`d

He should fully utilize all resources of

universe.

Goal of life is to obtain welfare in this life

and eternal ( ) life in the hereafter.

He is answerable for all his deeds to his

Lord.

21
 Difference between Islamic
Economic and Western
Economics

1 Difference in Basic Assumptions

a) View of the Universe
b) Concept of Man
c) The supposition of the Economic Man
2 Difference in operation of Moral values
3 Difference in aims
4 Difference in Scope
5 Difference in the Mode of research

22
Sources of Islamic Economics
1 The book of Allah (Holy Quran)

2 The Sunnah of Prophet Muhammad (sws)

3 Ijma

4 Ijtehad

23
1 The Holy Quran
The first and the most authentic source of
knowledge about Allah`s commands is
Allah`s Book i.e. THE HOLY QURAN.
It covers the general guidelines of all aspects
of human life.
The basic guiding principles for ordering
economic life of man are preserved in this
book in the light of which detailed policies
and program may be designed to resolve
economics issues arising in the every age.
24
2 The Sunnah

Next to the Holy Quran, the Sunnah i.e. the

example set by the Allah`s Messenger (sws)
is an authentic source of knowledge.

It is in fact the interpretation and explanation

of Allah`s revealed message.
Take whatever the Messenger gives you and
refrain from whatever he forbids you [Al-
Hasher]

25
Cont`d
The record of Sunnah contains
theoretical and practical guideline of
almost all aspects of economics life.

Its a very important source to which

Islamic economist must turn for
research and analysis.
3 IJMA
The third source of Islamic law is
consensus of experts of religion.

Ijma emerged as a result of exercising

reasons and logic in a rapidly
expanding society, such as in the times
of early Islam.

27
4 IJTEHAD
Literal meaning of Ijtehad is to strive to the
utmost.
In the Shariah it denotes the greatest effort
which is made to discover the law from the
implications of Allah`s Book or Sunnah of
Prophet Muhammad (sws).

The need for Ijtehad arises in those matters in

which direct guidance is not available in the
Quran and Sunnah.
28
Cont`d

Is everyone competent to exercise

Ijtehad ????
NO!!!!
Only the one who has advance
expertise in the knowledge of Quran
and Sunnah with high degree of
honesty and piety and flawless morality
and character.
Moral Values & Economic System
of Islam

1 Piety ()
2 Equality
3 Brotherhood ( )
4 Justice
5 Benevolence ( )
6 Cooperation

30
 thanks

Prepared by: