A Note on Islamic Economics

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interested in Islamic economics may contribute to a reconstruction of a politicaleconomy based on moral philosophy, and serve to provide a common ground foranalysis of all behavior.

15. A simple example of research into the contribution of Muslims to the history ofthought maybe helpful. Hicks (1986) suggested that the simplest example of theuse of the rationality assumption is the case of mercantile dealings where23

―each transaction is separate ... undertaken for its own sake, without referenceto the possibility that the terms on which it is made may influence the terms

on which it will be possible to make further transactions. ... . There can beno question of the rationality of the proceeding. ... . The merchant —the puremerchant, who confines himself to such market-oriented dealings—is theoriginal economic man. His behavior is so rational, so clearly rational, thatwe (economists) can readily reason from it; our reasoning from it is the startof economics. ....It may be objected that in the work of what we reckon tobe the first great school of economists, the classical economics of Smith andRicardo, the merchant does not so obviously occupy a leading place. .... Ibelieve however that the picture looks different if one goes further back. .... Itwas many centuries earlier, in fifteenth-century Florence, that merchants beganto study how to keep accounts. .... The appearance of the practice of keepingaccounts, which first appears among merchants, is a clear indication that thebusiness is being conducted rationally, with one eye to profit..... During thecenturies that elapsed between the invention of accounting and the time ofAdam Smith, the practice of bookkeeping must have spread quite widely ....Thus it was natural to assume that non-merchants, or many of them, would bebehaving more or less like merchants. Though it was a simplification to treatthem as Economic Men, they would be moving in that direction. That was allthe classical economics needed, for their use of profit motive.‖

16. It is interesting that Hicks suggests in the same article that the classical economicsdid not need the assumption of utility maximization: ―it is notable that theclassical economists did not treat the consumer as an Economic Man; they had noneed to do so. That comes in with Jevons, with Marginal Utility. The producerwas making money, so his goal could be set in monetary terms. The consumer isspending money, so his goal must be defined in a different manner. ‗Utility‘ hadto be invented in order to give him something in which to do his maximizing. .... To treat consumption, or spending, as a maximization against constraints is soappealing, mathematically, that it was bound to carry all before it. But, is it anymore than a convenient assumption? There can be no question of the service it hasperformed in fitting statistics into a pattern; but that is just convenience—it doesnot show that people do act in the way the theory describes.‖