Why Islamic Economics cannot be understood within EconomicsByM. Fahim Khan

Many Muslim Economists dispute the use of the term Islamiceconomics to refer to as an alternate science of Economics. Theybelieve that every thing that we want to say as Islamiceconomics, we can say it within the Economics, like we do notneed an alternate science to explain socialist economics, welfareeconomics etc. Science of Economics is believed to be wide enoughin its scope to allow analysis of any economic doctrine. Thisessay may also be of interest to those Economists who are notfamiliar with Islamic teachings on economic matters and arecurious to know how Islamic teachings can affect the scientificinvestigation into the economic behavior of man on earth.

This essay explains that there are several reasons to justifythat we do need a different analytical framework toscientifically explain economic behavior of man in the backgroundof divine knowledge that we get from our religion. The currentanalytical framework of conventional Economics is neitherrelevant nor broad enough to realistically understand economicbehavior of people with different worldview or living underdifferent cultures. This essay first gives a brief overview ofdifferent reasons to justify the above claim and then it goes indetail to explain only the first reason, leaving other reasons tobe discussed in detail in successive essays.

This paper identifies four reasons 1. Objective of economic activity in reality is not same as

assumed by conventional Economics2. Several Economic concepts that are important in economic

life of man are ignored by conventional Economics3. Several widely held human instincts influencing economic

behavior of man are ignored or assume away by conventionalEconomics

4. Role of Institutions in influencing economic behavior of manhas been ignored by conventional Economics

We need to take care of these aspects of economic life of manearth as we learn their significance from the divine guidance.Taking care of these aspects in economic analysis is not possiblein the current analytical framework of conventional Economics.These aspects are briefly discussed below in the perspective ofIslamic system of life as embedded in the divine guidance.

Objective of Economic ActivityThe first and foremost feature of Islamic economic thought thatdistinguishes it from conventional economic thought is theaxiomatic assumption about the objective underlying economicactivity.

Conventional economic thought assumes that economic activity isundertaken to satisfy wants and wants are generated by humandesires. Any thing that has the ability to satisfy a desire isthe want of man and man will seek to acquire it. And this issupposed to generate economic activity. Man’s objective ofeconomic activity is assumed to be ‘satisfying wants’.

Economic thinking, in Islamic perspective, does not like to makereference to desires as the underlying objective of economicactivity. This thought emerges from the divine guidance not tofollow Hawaa (desires).

Have you seen he who has taken as his god his [own] desire, and Allah has sent him astray due to knowledge and has set a seal upon his hearing and his heart and put over his vision a veil? Sowho will guide him after Allah? Then will you not be reminded? (The Quran 45.23) Also see (The Quran 25:43)

“….. many do mislead (men) by their appetites unchecked by knowledge. Thy Lord knoweth best those who transgress. (The Quran6: 119)

Islamic thought on objective of economic activity is derived fromthe Islamic philosophers’ thought on objective of sharia (Islamic

laws for human behavior). The objective of Islamic laws is statedto be human wellbeing. Since divine laws cannot be expected to beagainst human nature1, it is, therefore, assumed that objectiveof economic activity in principle is to seek wellbeing, which inturn means sustaining and ameliorating all aspects of human lifeon earth such as

1. Self2. Family3. Wealth4. Religion5. Reason6. Dignity7. Freedom8. Etc.

Anything that has ability to contribute to sustaining andameliorating any of aspect of life is a human need. And this issupposed to generate economic activity. Man’s objective ofeconomic activity is thus assumed to be “fulfilling needs”.

The objective of economic activity is to ‘fulfill need’ not ‘satisfy want’. This is thus the first point of difference between Islamic economic thought and conventional economic thought. It will be argued in detail that there are a priori reasons to believe that man’s economic activity is motivated by need not desire. This is not merely semantic. Most of the human needs may also be human desires but not necessarily. Some needs are imposed by society, religion or custom and may conflict with personal desire. Similarly all desires may not necessarily be needs. Smoking, drugs are simple examples to mention. It will be argued in the next essay this is a substantial difference and that the current analytical framework of conventional Economics does not allow the analysis of economic behavior and economic

1 So set thou thy face steadily and truly to the Faith: (establish) Allah's handiwork according to the pattern on which He has made mankind: no change (let there be) in the work (wrought) by Allah: that is the standard Religion: but most among mankind understand not. (The Quran: 30:30)

decision making under the assumption of ‘fulfilling needs’ as basic objective of economic activity. There are two aspects of this issue. First aspect is providing evidence, conceptual or empirical, for the hypothesis that economic activity, in principle, is triggered by need not by want. Second aspect is to explain what difference would it make in economic analysis if we replace ‘satisfying want’ by ‘fulfilling needs’. The next essay will discuss these aspects in detail.

Besides this conceptual difference on the objective of economicactivity, there are following elements in Islam’s teachings thatprovide explicit guidance to humanity about how to understandeconomic activity on earth. These are:

1) Set of unique economic concepts that are conveniently orconsciously ignored by conventional Economics despite theirdominant role in shaping economic behavior and economicactivity

2) Set of human instincts that are conveniently or consciouslyignored in analyzing human behavior despite their stronginfluences on human economic behavior and human economicactivity

3) Set of institutions (including set of beliefs, customs,rules etc.), conveniently ignored2

These elements are not in the nature of normative elements butthey are positive elements related the human nature and theseelements do not single out their relevance only for these whobelieve in Islam. They in fact are applicable to all human beingsin general and to civilized societies and cultures, inparticular.

Framework conventional economics ignores these elements but theseelements are important to us and require us to develop our own

2 A new discipline, in the name of New Institutional Economics, however, is emerging that analyzes human behavior in the context of institutional framework, but its scope is still limited.

framework of economic analysis because the conventional frameworkhas no room to accommodate these elements.

Economic concepts ignored by conventional EconomicsThere are some economics concepts that conventional Economicsconveniently ignored or did not like to recognize them becausethey did not them amenable to so-called scientific analysis (ormathematical manipulations) or they were simply were not aware ofthese concepts. We believe in these concepts because they came tous through divine sources we and believe in them as positivefacts about economic matters amenable to as scientific analysisas any scientific investigation require and we find them morerelevant to describe reality about economic matters or economicactivity or economic behavior or economic decision-making. Theneed for developing an alternate framework for economic analysisrecognizing these concepts is a need not only in the interest ofdeveloping Islamic Economics, but it is also in the interest ofconventional economics to provide it a more scientific, relevantand realistic perspective. Below is list of these concepts. Thisis not comprehensive list. But this list is sufficient to make acase to identify the type of analytical framework that needs tobe developed and present an alternative economic paradigm.

1. Rizq2. Gharar3. Israf 4. Itraf5. Infaq6. Rushd7. ‘Adl with Ihsan8. and many other

Though these are all Arabic terms yet mere translating them willnot help understand their meaning and their relevance forunderstanding economic behavior of man and economic institutionsof a society. In these essays I will be trying to explain theseconcepts and their relevance for economic activity. I do notclaim that my explanations will be the explanations of theseconcepts. I will only be trying to provide an objective

assessment of these concepts to make the case that these conceptsneed to be explored in depth to understand economic activity onearth and to see the need of restructuring the analyticalframework, and hence develop a more relevant and realisticscience of Economics than what we currently have.

Human Instincts Ignored by conventional EconomicsAnother important element besides the above concepts isacknowledgement of the role and significance of various humaninstincts given in the human nature. Conventional Economicsrecognize only one instinct i.e. self-interest. We all know thathuman nature has several instincts. Divine guidance not only tellus that there are other instincts equally important for economicbehavior but also provides motivations how to keep thoseinstincts balanced in pursuing economic objectives. Thesemotivations have helped developing balanced economies in theIslamic history. The bias to consider self-interest as a basisfor economic activity has created imbalances in economy. Growingeconomic prosperity co-exist with such economic problems associal exclusions, income equalities, hunger and starvation. Iwill particularly be discussing the role of following instinctsand the divine guidance that provides motivation to keep thesocial, environmental and development dimensions balanced withself-interest in economic behavior of man. The divine motivationsfor following instincts that affect economic behavior besides theself-interest instincts will be discussed in these essays:

1. Self-interest2. Care-for-others instinct3. Instinct to avoid waste4. Instinct to live clean life5. Instinct to learn6. Instinct to be moderate7. Instinct to be modest8. And some other

The modern economists do recognize the significance of these instincts but they are not discussed in Economics when it is the

matter of analyzing economic behavior of man and its consequencesfor the economy or economic system. For example, the philosophers and thinkers consider that it is inthe human nature to care for others. According to Adam Smith (Theory of Moral Sentiments), humans have natural tendency to care about the well being of others ...... (though he did not make it a part of his economic synthesis of human behavior). Similarly, John Stuart Mill talks about the obligations to peoplewe do not know but it does not enter in the scope of Economics. For catering to self-interest in economic activity, Islam gave the institution of competitive markets (elaborated in Fiqh al- Buyu'3). Islam gave a different set of institutions to cater to the caring-for-others instinct. It is in the form of Infaq. Whilemodern Economics independently picked up the former concept (competitive markets for self-interests), modern Economics, conveniently, ignored the discussion of institutions that every civilized society develops to provide care-for-others. And this brings us to the third feature of Islamic economics that we cannot study in the conventional Economics.

Role of Institutions ignored by conventional EconomicsDivine guidance on economic matters led the Islamic society develop institutions to coordinate and synchronize all human instincts to reform human economic behavior and create balanced and prosperous economy. This is what made the period of about onethousand years in Islamic history a golden age. The history of economic thought failed to recognize this institutional development and its role in economic prosperity shared equitably because institutions are not the subject of conventional Economics. The divine guidance and 1000 years of Islamic history has a lot to offer the modern civilization in terms of understanding institutional needs to create and sustain efficient, equitable, socially inclusive and environmentally friendly economy. Conventional Economics only studies efficiency and leaving other dimensions of economy to other disciplines to study. Divine guidance suggests that a much broader approach has

3 Islamic Jurisprudence about exchange

to be taken to understand economic behavior and economy than the approach that conventional Economic takes.

This essay discusses in detail the first aspect discussed above;namely, Objective of Economic Activity. The other aspects will betaken up in detail in successive essays.

Objective of Economic ActivityOne of the basic reasons of why Islamic Economics cannot beunderstood within Economics raised relates to the starting pointof Economics. What it is it that generates an activity, whichshould be labelled as economic activity is the basic question.The starting point in conventional Economics is that man haswants and seeking the means to satisfy these wants generateseconomic activity. There is no objective basis for thisassertion. It is merely an axiomatic assumption about humanbehavior. It has already been mentioned above that an analysis ofhuman activities in Islamic perspective couldn’t start with thisassumption because pursuing an activity to satisfy unqualifieddesires and wants is not rational human behavior. The divineguidance tells us that

“Have you seen he who has taken as his god his [own] desire, and Allah has sent himastray due to knowledge and has set a seal upon his hearing and his heart and putover his vision a veil? So who will guide him after Allah? Then will you not bereminded?” (The Quran 45.23) Also see (The Quran 25:43)

“…. many do mislead (men) by their appetites unchecked by knowledge. Thy Lordknoweth best those who transgress.” (The Quran 6:119) The divine guidance is:“….. So follow not lust, lest you not be just …..”

Our belief is that if unqualified desires and wants were rationalbasis for human behavior, divine guidance will not condemn it. Itis our belief that divine guidance is consistent with humannature.

“….. (establish Allah’s handiwork according to the pattern on which He has mademankind: no change (let there be) in the work (wrought) by Allah: that is the standardReligion: but most among mankind understand not.” (The Quran 30:30)

While human beings do have desires and wants but human beings notalways follow them blindly. Human beings, as a matter ofprinciple, weigh their desires against what is good for them andwhat is not before they proceed to satisfy them.

“And if the truth had been in accordance with their desires, verily, the heavens and theearth, and whosoever is therein would have been corrupted! Nay, We have broughtthem their reminder but they turn away from their reminder,” (The Quran 23:71)

What alternative assumption can we make to define an economicactivity, which should be more realistic, more relevant and morereasonable than relating economic activity to satisfyingunqualified desires or wants? Conventional Economics does nothave room for any other assumption. If any other assumption isintroduced in conventional Economics, then its existinganalytical framework becomes irrelevant.

Islamic scholars and philosophers like Shatibi and Ghazali, whoare respected in the today’s modern world also, explain thatobjective of Sharia (Islamic Laws for human behavior andinteraction) is human wellbeing. Since divine laws cannot beexpected to be against human nature (as quoted above) it is,therefore, assumed that objective of economic activity, inprinciple, is to seek wellbeing. This, in turn, means sustainingand ameliorating all aspects of human life on earth. The aspectslife can be objectively categorized. Shatibi, for example,referred to following five aspects of life.

9. Self10. Family11. Wealth12. Religion13. Reason

More aspects can be added to such list, if reason requires. Onemay, for example, think of adding following aspects too in thelist.

14. Dignity15. Freedom

Whatever the list, the components will have one common featureand that will be the link with wellbeing of man.

If we take this approach to distinguish economic activity, thenit will not only be consistent with divine guidance but will alsobe more realistic, more relevant and more rational than theapproach of conventional Economics. The following distinction isconspicuous in this approach compared to the conventionalEconomics approach.

1. Fulfilling ‘Need’ not satisfying desire or want will be assumedto define economic activity

2. Masleha (Benefit) not Utility is sought from the economicactivity

3. The goods (commodity or service) that can benefit any aspect ofhuman life is a ‘need’ not the goods that may have so-called‘utility’ but are harmful to human life

4. Goods (commodity or service) will not qualify as Economic goodsunless they are legitimately owned under law and customs of thesociety and mere physical ownership will not qualify them aseconomic goods

5. Goods (commodity or service) will not qualify as Economic goodsif they do not have value and goods and services that divineguidance prohibits to be used by human beings

Besides terminology, this approach introduces substantivedifferences that have implications for economic analysis.

Masleha, an Arabic term refers to benefit for mankind. Man atindividual level often recognizes Masleha but some times it hasto be acknowledged or realized through law, religion, custom andtradition. This may be true for the conventional concept ofUtility as well. But there is subtle difference between the two.

When Masleha and utility is on ground of law, religion, custom ortradition they may have same implication for economic behaviorbut when Masleha and utility is on personal grounds then the twoterms mean two different things, having different implicationsfor economic activity, economic behavior and economic decision-making. An individual can justify smoking and drugs as havingutility but cannot justify as having Masleha (except on medicalgrounds). On the other hand, an individual may not feel utilityin educating his children or enrolling in compulsory militaryservice but will still have Masleha for the individual.

How do we establish that Masleha not utility generates economicactivity?We establish it by intuition. A rational human being’s primarymotive for any activity would be to do something that benefitshim in improving his life. Benefit includes satisfaction. Butbenefit is more than what is understood by mere satisfaction.More is better than less for a rational mind. Man goes for morebeyond what he can call mere satisfaction. He goes for asatisfaction that contributes also to his wellbeing. He willprefer this to what gives him simple satisfaction but does notmean anything for his wellbeing in his life.

This may be established empirically as well. It is a testablehypothesis whether economic decisions are based on simple wantsor on wants that carry some objective benefit for his life.

The subject of economic analysis is primarily a cost-benefitanalysis. It makes more sense to consider benefit directly ratherthan through utility. Using the term benefits instead of utilitymakes more sense.

Society, institutions and religion affect human behavior andhuman motivations. Benefit includes these influences but utilitydoes not.

What difference would it make to call it benefit rather thanutilityIt is not merely semantic whether we call it benefit or utility.It is makes us to distinguish between ‘need’ and ‘want’ and it isthis distinction that makes us to develop our own analyticalframework.It makes the analysis based on an objective analysis of economicbehavior. Masleha and hence benefit is objectively definablecompared to utility.

The objectivity element in Masleha makes it possible to makeinterpersonal comparison to study the social welfare effects ofindividual economic decisions. It helps us integrate personalpreferences and social preferences and integrate individualwellbeing with the social welfare, a subject that conventionalEconomics fails to resolve.

Concept of Masleha based on human wellbeing takes us to theconcept of need that generates economic activity, which in turnrequires a complete review of the framework for economicanalysis.

The following elements are needed to be included in ouranalytical framework

1. We need to understand the process of prioritizing needs on thebasis of Masleha/benefit. This is different from prioritizingwants on the basis of utility. In a utility-based approach, wecan assume indifference between two wants on the basis of utilityor satisfaction and can choose one or the other while keeping ourtotal utility unchanged. But we cannot choose to fulfill one needor the other without changing overall level of our wellbeing.

2. In utility-based approach we seek to maximize utility but inneed-based approach there is no consideration of maximizing orutility. In the context of fulfilling needs, the objective isbalancing the benefits. We cannot measure the benefit ofconsuming different quantities of food versus benefit ofdifferent quantities of clothing.

Needs

Objective of human activity is to enhance wellbeing. Anythingthat has ability to contribute to sustaining and ameliorating anyaspect of life is a human need. And this is supposed to generateeconomic activity. Man’s objective of economic activity is thusassumed to be “fulfilling needs”. Though most of the human needsmay also be human desires, but not necessarily. This is reality.Some needs are not results of human desire but are imposed bysociety, religion or customs. Similarly all desires may notnecessarily be needs. Some desires may be prohibited by religion,society and customs. This is reality too. It will be argued inlater essays that ignoring these realities have allowed severaleconomic problems for which conventional Economics has nosolution.

We are gone far ahead of Robinson-Crusoe economy wherebanana and fish is the only need of the society as well as ofindividual. The first relevant question when Friday joins them iswhat should Friday produce and how much. They will naturally liketo discuss together how much banana and fish to produce to meetthe banana and fish needs for all three. Robinson and Crusoeshould ask Friday whether he would like to produce some morebanana or some more fish or some thing else that he as well asRobinson and Crusoe can share for banana and fish. If Friday saysthat he likes counting stars and that is what he will do for themin exchange of banana and fish, this will not work. Need would bethe basis for choice.

Hierarchy of needsAnother realistic feature of need as a basis of economic

activity is that some needs can be fulfilled at different levels.At one level it will simply mean sustaining a particular aspectof human life and at another level it will mean ameliorating orbeautifying some aspect of human life. The levels have ahierarchy. Ameliorating any aspect of life will not take placeuntil necessary steps to sustain that aspect have been taken.Similarly, sustaining a particular aspect of life will havepriority over ameliorating or beautifying another aspect of life.Fulfilling need at different level has different amount ofMasleha. Some needs are essential, some are complimentary and

some are ameliorating. Essential needs have preference overcomplimentary needs and complimentary needs have preference overameliorating needs.

Islamic Economics seeking to develop an analytical framework thatwill relate economic activity to "need fulfilment" rather than“utility maximization” faces a new challenge that conventionalEconomics cannot help to meet.

Economic ProblemThe economic problem in the perspective of need-based approachis:

a) To identify needsb) To prioritize the needsc) To keep balance in fulfilling needs

The framework of conventional Economics does not allow us tounderstand human behavior in this respect.To keep the discussion simple, I confine the discussion here tothe two key features our framework of economic analysis.

1) Needs fulfillment (rather than satisfaction of wants) as the mainfocus of economic activities.

2) Balancing (rather than optimizing) as a key element in humandecision making in all his activitiesNeed Fulfillment

Apparently it may seem that distinguishing needs from wantsis merely semantic. But, in fact, the distinction is as real asthe distinction between instinct and reason is. Wants resultfrom instinctive desires. But human beings, in a social set up,are not expected to jump immediately to want something that willsatisfy the desire. Human beings imbued by certain value systemevaluate and classify their instinctive desires into:

a) Wants (to give him personal satisfaction) andb) Needs (to be more than personal satisfaction or beyond personal

satisfaction

Whereas satisfaction of wants is assumed to signify human welfareby conventional economics, the fulfillment of needs, in thisdiscussion, will be distinguished as signifying human wellbeingin a more comprehensive and objective context than merely in apersonal and subjective context.

It is the needs that qualify to be fulfilled on priority. Wantsmay appear at bottom in the priority list or will lie below theline to wait for circumstances that would qualify them also asneeds to be fulfilled. Pursuing wants and instinctive desires andseeking to maximization satisfaction from them is like playing agamble with the fulfillment of needs that signify wellbeing. Theuncertainty may fall on wellbeing more adversely if onlywants/desires are focus of the decision-making.

Those who would regard this distinction as only semanticdifference may be due to the effect that a substantial part ofneeds may only be due to the impression that a great numbers ofwants can also qualify as needs and a considerable part of humanbehavior, therefore, can be explained within either of the twoapproaches (want-based approach or need-based approach). But thatpart where the two approaches will not produce same result isactually what matters for almost all societies when the concernis human wellbeing and social welfare. The substantial differencein the two approaches can be summarized by pointing out thatformer approach will not distinguish between welfare as pursuedby lower order animal and the social animal having a higherstatus because of its power to reason. The later approach focusesspecifically on welfare of the higher order animal called socialanimal or human being. The later approach will not only make theanalysis more realistic but will also broaden the scope ofEconomics to address issues which currently remain outside themain stream of Economics.

“Balancing” as Key Element in Human Decision Making

Justice, as another face of balance, is also a positive instinct.Human nature wants justice to prevail. Society collectively

takes care of this human instinct. There is an inner desire inhuman beings to see justice done in all activities in a sociallife. While justice may hurt, at occasions, but as a part ofcivil society, one knows that by and large prevalence of justicewill be in individual’s own advantage. In general, individuals ina society would have an urge to have justice in the society andsome formal or informal institutions will always exist in asociety to ensure justice to every one.

“We have always known that heedless self-interest was bad morals;we know now that it is bad economics”4

Justice in human economic activity means maintaining balancein fulfilling needs. We need to understand how human beingsachieve balance in pursuing their needs. What are the principlesthat a rational man keeps in man to achieve this balance?Balancing is the counter part of the concept of maximization,optimization, minimization, etc. used in the conventionaleconomic analysis recognizes for explaining the behavior ofeconomic agents. The significance of the concept of balance inIslamic worldview can hardly be over emphasized in the light ofQur’anic view of this world and human life therein. The followingstatements from the Quran are worth noting:"And the Firmament has he raised high, and He has set up the Balance; in order that yemay not transgress balance. So establish weight with justice and fall short not ofbalance. (55: 7-9)""And the earth We have spread out; set thereon mountains firm and immovable; andproduced therein all kinds of things in due balance. And we have provided thereinmeans of living for you and for those for whose sustenance ye were not responsible.And there is not a thing but its treasures are with us; But we only send them thereof indue and ascertainable measures”. (The Quran 15: 19-21)“And the servants of Rehman (the Lord) are those Who, when they spend, do so notexcessively or sparingly but are ever, between that, [justly] moderate" (The Quran25:67)

a) In our analysis of economic behavior of human beings, we willtherefore be more concerned with how human beings achieve balancein meeting their different needs affecting different aspects of4 Franklin Delano Roosevelt, Second Inaugural Address, January 20, 1937.

life rather than how they maximize their utility. Man, generally,likes to seek balance in all his activities to achieve objectivesin different dimension of his life. Maintaining balance is apositive attitude rather than a normative attitude. It can beobserved in human behavior in all cultures. And it is a testablehypothesis, which can be tested empirically. This will howeverraise the same two questions as were mentioned in case of‘Masleha’ as a basis of human activity.

b) How do we establish that balancing not optimizing is theobjective of the economic activity of man?

c) What difference would it make in the analytical framework if wereplace balancing of Masleha instead of maximizing utility

How we establish the balancing attitude in human behaviorHuman beings, for example, do put a break on certain activitieslike eating or drinking or recreation while there is capacity tocontinue to enjoy more. The break is necessary as there are otherneeds like education or health or home improvement etc. to bemet. On parallel side, there will be instinct of seeking power,seeking and adopting hedonistic behavior, which may run counterto the balancing instinct. Which instinct will normally prevail?Conventional Economics presumes that hedonistic behaviorprevails. We, however, take the position that civil life andsocial life requires balancing instinct to prevail. Civil andsocial life will more likely be looking for putting some limitson the hedonistic instincts because that is a potential source ofcreating imbalance in the society and disturb peace and harmonyamong people.

In theorizing economic behavior and developing a framework forthe analysis of economic behavior, we can see the important roleof balancing attitude in economic life of individuals andsociety. Balancing is a natural and realistic element inactivities and human decision-making. Balancing actuallyunderlies in all rational human behavior and rational all humanactivities. It is a human instinct that values balance andcreates a desire to maintain it. Where as the instinct, thatleads to maximization, whether of utility or of profit, is an

instinct that every civilized society tries to moderate andregulate to create balance in a social environment. Sociologistsrefer to self-discipline and self-control as prominent featuresdistinguishing between human beings and lower order animals.Self-discipline is considered the measuring stick of being"human" in the sense that more disciplined behavior (determinedby human capacity to reason and human instinct to be sociallyresponsible) is reflective of a property of higher order animalwhereas the less disciplined behavior (in response to hisinstinctive desires) is considered as reflective of a sort oflower order instincts that are lacking in reason and socialresponsibility and are driven merely by instinctive desires. Forany civilized society that requires certain amount of selfdiscipline and self control from its members, the "balancing" isthe most important element underlying decision making process ofman with respect to the allocation of resources and time at hisdisposal. As reason and instincts may often conflict, some rulesalways operate in the society, voluntarily or involuntarily,explicitly or implicitly, written or unwritten, to ensure self-control and self-discipline to maintain some balance inindividual’s personal life as well as in his social life. Theserules whether designed by the society through some politicalprocess or received as a part of divine guidance (most of them,in fact, are already built in the nature of man) do not negatethe fact that balancing by and large is part of the way of humanlife in a civilized society.

Incorporating balance of Masleha (determined by reason and senseof social responsibility) instead of maximization (of suchinstinctive drives as utility or profit) would make a frameworkfor analysis of social life in general and economic life inparticular more realistic and objective. If we succeed indeveloping a general framework of economic analysis based onprinciples of benefit and balancing, it will be relevant to useit to analyze the economic behavior based on hedonistic instinctslike maximizing satisfaction.

Hedonistic instinct, no doubt, is also a reality, which cannot beignored. The lust for satisfaction and power (leading to seek

maximization of utility and profit) is an instinctive realitytoo. The Quran explains that.

"Beautified for people is the love of that which they desire - of women and sons,heaped-up sums of gold and silver, fine branded horses, and cattle and tilled land. Thatis the enjoyment of worldly life, but Allah has with Him the best return" (The Quran3:14).

Islam reduces the significance of such instinct.

“Say: Shall I give you glad tidings of things Far better than those? For the righteous areGardens in nearness to their Lord, with rivers flowing beneath; therein is their eternalhome; with companions pure (and holy); and the good pleasure of Allah. For in Allah’ssight are (all) His servants” The Quran 3:15)

So do all civilized societies (irrespective of their religiousbeliefs). Society puts some restraint on the pursuit of thislusts mentioned above. Besides some legal restrictions, a largepart of constraint comes from the morals and ethics that asociety agrees to adopt and abide by. These morals and ethicsrequiring self discipline and social control aim at ensuring abalance and harmony in the society so that unrestricted pursuitof this lust does not put aside the goals that a society wishesto achieve, such as social harmony, peace, equity etc. and alsothat individual does not lose track of self development. TheQuran teaches this in the above-mentioned verse.

Fear of Allah in the verse mentioned above is to invoke self-discipline and self-control in the pursuit of the lust for wealthand worldly power and a prelude to ensure balance in humanbehavior economic as well as social.

Lust for satisfaction of instinctive desires (and hence pursuitof maximization of utility and profit) is always there in humanbeings. It is the society and its institutional framework thattries to ensure that lust does not go out of balance. Economicsas a science should be concerned with the study of the behaviorof man in achieving the balance in the pursuit of its economicgoals. The conventional Economics choses only to study the

pursuit of lust and that was the reason it was criticized andAlfred Marshal had to define Economics as concerned with humanwelfare5. But subject matter of Economics continued to remain howto explain the pursuit of lust for maximization of utility andprofit.

Since welfare is a multidimensional concept covering all aspectsof human life, the pursuit of welfare then would require that"balancing" be maintained in all dimensions. Economics, thus,would be a science concerned with human welfare if the balance inabove sense were its subject matter.

Making the balance a subject matter of economic analysis is notthe denial of the reality of lust for satisfaction. There wouldalways be a limit within which pursuit of lust would not conflictwith the concept of balance required by reason and by socialnorms. To that extent conventional Economics will remain valid.But to that extent, the Economics will only be similar to theeconomics of lower order animals. Islamic Economics for humanbeings and human society will start only when the issue ofbalancing becomes relevant.

What Framework of Economic Analysis will suit such analysis?If need is the focus and achieving a balance in fulfilling needsand hence maximize wellbeing is the objective of economicactivity of man then we need a different framework for economicanalysis of human behavior. Conventional analytical framework ofeconomic analysis is not suitable for analysis of economicbehavior in these directions. The conventional framework ofeconomic analysis benefitted from science of physics and heavilydepends on tools borrowed from mathematics. The question isoften raised, “Why the science of physics has been relied upon todevelop the framework of economic analysis”? Inspired by thescientific methods of natural sciences, economists probably were

5 Alfred Marshall in his 1890 book Principles of Economics wrote, "Political Economy or Economics is a study of mankind in the ordinary business of Life; it examines the part of the individual and social action which is most closelyconnected with the attainment and with the use of material requisites of well-being."

attracted to use similar methods to make economics as precise ascience as physics is, conveniently forgetting that Economicsstudies human behavior, not lifeless objects. The scientificmethods similar to that of physics, though, succeeded in gettingEconomics a higher status among other social sciences yet, in theprocess. it lost track of reality. It failed to cover severaleconomic problems currently faced by humanity that fail to beincluded in its analysis. Many economists are critical ofdepending on physics and mathematics to adopt a framework foreconomic analysis6.

If Physics and Mathematics do not provide good analyticalfoundations then what other science can provide a more relevantbasis for analytical framework for economic behavior? A quickreview of other natural sciences, biology which is a sciencedealing with study of life deserves our attention. Unlikephysics, a science studying lifeless bodies, biology seems morerelevant because it deals with life and studies behavior andEconomics also deals with studying a particular behavior in humanlife.

Biology is pre-requisite for medical science that deals withhealth of human body. Biology is a framework for analyzingliving bodies in order to help identifying diseases andmalfunctioning in a living body. In the context of economy, weoften use the term “economic health”. If the framework ofeconomic analysis is designed on the pattern of biology, it willbe more relevant with respect to identifying economic problems ofa society and how to treat them. Social sciences includingscience of Economics, while trying to understand human behavior,explicitly or implicitly aim at defining social problems,understanding how they occur, and how they can be treated. Theframework borrowed from science of physics does not allowidentifying macro economic problems and to relate them to theproblems at micro level. The macro economic problems, likepoverty, economic development, intra and intergeneration equityetc., therefore, have to be discussed without reference to their6 These economic thoughts of economists are pooled under the title “Heterogeneous Economics”.

linkages in the economic behavior at the level of individualhuman being. Malfunctioning at macro level cannot be independentof malfunctioning at micro level. Human behavior at micro levelmust be suffering from certain imbalances that reflect into illhealth of economy at macro level.

We find, in biology, a framework called Anatomy and Physiology(A&P). This framework divides the human body in to differentorgans. These organs are dissected for the purpose of analyzingtheir nature and understanding their system. This is calledgross anatomy a counterpart. A microscopic study of very smallstructures (cells and tissues) within an organ is microscopicanatomy. Anatomy also analyses organ system, which is a group oforgans that cooperate to accomplish a common purpose (such asdigestive system which is composed of several organs like,stomach, small and large intestine etc.). Various organ systemstogether make up a living body. Human anatomy studies thestructure of human body and its relation to functions in thehuman body. The anatomy is done in several perspectives.Besides gross anatomy and microscopic anatomy, there are regionalanatomies (studying structure by body region), systemic anatomy(studying structure by biological system) etc. We can visualizesimilar counter terminologies in economic analysis.

We can visualize a certain organ system (like digestive system)as a system of economic behavior which is integrated with othersystems (like ethical system, family and socialinterrelationship, system of legal obligations etc.) in the overall human behavior in the society. Macroeconomics can be seen asa counter part of gross anatomy of an organ and microeconomics iscounter part of microscopic anatomy within an organ.

Physiology is a study of the functioning of living organisms ortheir parts (like tissues or cells within the organisms). It isdifferent from anatomy, which only describes the organisms andtheir constituent tissues or cells. Physiological processes aredynamic. Cells change their function in response to changes inthe composition of their local environment. Many physiologicalreactions are aimed at preserving a constant physical and

chemical internal environment. This is referred to ashomeostasis.

Homeostasis refers to the ability or tendency of an organism orcell to maintain internal equilibrium by adjusting itsphysiological processes. It is a balanced internal environmentof a living body and the automatic tendency of a family system tomaintain internal stability to resist change caused by externalvariation. The most commonly known examples are temperature andblood pressure of the body, which remain nearly constant or tendto remain constant despite changes in organism’s activity levelor in organisms surrounding conditions and environment. Thereare self-regulating processes in living bodies to maintainhomeostasis. Living bodies have build-in tendencies or self-regulating processes that seek and maintain a condition ofbalance or equilibrium within its internal environment, even whenfaced with external changes. (Many ecological, biological andsocial systems are behind to be homeostatic)7. A similardescription can be developed for describing a living body we maycall “economic man”.

It will also be instructive to note that structure of a livingorganism has different levels, like atoms, cells, tissues andorgan. At organ level various functions are performed, andsometimes these functions are very complex. A group of organstogether make organ systems that cooperate to accomplish a commonpurpose. Each organ has a different structure suited to performits function. For example, digestion system includes organs likeesophagus, stomach, small intestine, large intestine etc. Eachof these organs has own job to do. They all work together tokeep food moving through the digestive system, breaking it downproperly to absorb it into the blood, providing food for body’scells. Different organ systems together make up an organism.A&P counts eleven organs that make an organism that we know ashuman body. Different organ systems of a living organism do not

7 In Sociology and Psychology we may find stress homeostasis referring to the tendency of the individual or population on the whole to stay at a certain level of stress, often generating artificial stress if natural level of stressis not enough.

work in isolation. Instead, they work together to promotewellbeing of the entire body8. This theme of A&P providing aframework for the science of Biology can be well adopted todevelop a framework for the science of Economics.

The terminology of A & P and Biology can easily be translatedinto the terminology of microeconomics, macroeconomics andEconomy. The terms like survival needs, homeostasis, homeostaticcontrol mechanism, homeostatic imbalance etc. are some examples.The concepts of biology and A&P like how to maintain homeostasis,how to develop homeostatic control mechanism and how to treathomeostatic imbalances are more relevant understandable than theconcepts like first derivative and second derivative or concaveand convex curves, slopes and cross to describe human behavior.

Lessons from A&P for Developing Alternative Framework for Economic AnalysisSociety consists of different organ systems such as socialsystem, legal system, ethical and morals system, economic system,religious system etc. These systems are dovetailed into eachother to accomplish a picture making the shape society. Eachorgan of the society has a different function to perform thatwill complement the functions of other systems in achieving thecommon purpose of the society. Each of the system has its ownstructure to carry out the function assigned to it. They all worktogether to create wealth and allow it to be properly distributedand absorbed in the society in order to meet the needs ofindividuals (as digestive system digests and absorbs food toconvert it into blood to nourish the cells of the body). Allsystems work together for well being of the individuals in thesociety as well as of the society as a whole. If this paralleldescription is correct then obviously we can develop a frameworklike that of A&P to understand economic behavior of man andeconomic functions of the society.

I list below some of the similarities that we get from theframework of A&P to allow us to better explain economic behaviorof man and hence develop science of Economics, which is morerelevant and more realistic. 8 Elaine N. Marieb, Essentials of Anatomy and Physiology (16).

(1) A&P analysis tells us how to analyze structure andfunction of each organ system independently while stillrecognizing its linkages with other systems and overall wellbeingof the entire body. This is similar to how we would like to viewour analysis of economic behavior for properly understanding it.(2) A&P tells us that the study of human body as a livingorganism must understand its needs to strive and thrive. Thestudy has a focus on the well being of the body. Economics alsoneeds to do this as a study of economic behavior focusing on thewellbeing of human beings. (3) The concept of homeostasis as used in A&P leads us to tothink that there may be a balanced equilibrium in human behaviorsimilar to the balanced equilibrium in the human body. We shouldbe more interested in discovering the homeostasis in the economicbehavior as well as in the economy rather than confining todiscussing equilibrium in the form of Keynesian Cross or Marketsupply-demand cross only.4) A&P observes how fragile life is and how it survives andthrives in uncertain environment. How the body responds tomaintain balance when random changes occur in environment. Lifeis more fragile than economic behavior and economy, and theuncertainty faced by life are more intense than those faced byeconomic behavior and economy. We can get better insight intohow to take care of uncertainty in human behavior and economicenvironment while conducting our economic analysis.5) A&P defines diseases as homeostatic imbalances, theinability of the body to maintain balance. Economics analysis canalso define homeostatic imbalances with respect to economicdecisions. If that is possible we can then understand economicproblems at macro level and relate them to find as imbalances inthe micro behavior of man and hence finding the solution ofeconomic problems in the correction of imbalances in theindividual economic behavior.(6) A&P identifies nature of signals that are used by nervousand endocrine systems to accomplish homeostatic equilibrium. Itwill be equally beneficial for economists to define economic“receptors”, economic “control sectors”, and economic “effectors”that can serve as nervous and endocrine mechanism to establishhomeostatic equilibrium in the economy. Developing such

mechanism, in terms of institutional provisions in the economycan help the managers of the economy to continuously monitor thestrength of homeostatic control mechanism for any potentialthreats for the homeostasis at economy level. (7) If it is possible for the framework of economic analysis toachieve what has been mentioned in points 4 to 6 above then asystem of early warning signals for any potentially growingimbalances can be put in place so that corrective measures couldbe introduced at individual level or at institutional level toavert a potential crisis in the economy.(8) A&P framework of analysis makes it comparable from individualto individual. There are fixed set of criteria, in A&P frameworkon which organ systems of all individuals are evaluated.Individual economic behavior, as discussed earlier, is similar toan organ system. It should be possible develop criteria toevaluate the individual economic behavior in relation to theobjective of life which is supposed to be same for allindividuals in a society sharing same world view.(9) If a framework can be developed to take care of the elementsmentioned above, the analysis will lead to concluding what typeof institutions need to be developed, to form a homeostaticcontrol mechanism for the economy and economic man.

Broadly speaking, we can visualize the society as a livingorganism consisting of different organ systems such as socialsystem, legal system, system of ethics and morals, economicsystem, religious system etc. These systems operate in anintegrated form to accomplish a common purpose reflecting theworldview of society. Each organ has a different function toperform that will complement the functions of other systems inachieving the common purpose of the society. Each of the systemhas its own structure to carry out the function it performs.Economic system is one system with its own structure to achieve aspecific purpose. Its components such as households, firms,market etc. all work together to create wealth (the blood of theeconomy) and allow it to circulate, distribute and absorb in theeconomy in order to meet the needs of individuals (as digestivesystem digest and absorbs food into blood to nourish the cells ofthe body). All systems, including the economic system, work

together for well being of the individuals in the society as wellas of the society as a whole. If this parallel description iscorrect then obviously we can develop a framework like that ofA&P to understand economic behavior of economic agents (ashousehold, firms, government, voluntary/charity institutionsoften known as NGOs) in the society.

To develop a complete framework of economic analysis based on anew approach will be, though initially a complex task willultimately give us a better understanding of economic behaviorand functioning of economy.At this stage let me point out only a couple of features of sucha framework. Survival NeedsGrowth in human body is built-in, if it survives. So is theeconomy. Growth of economy is inevitable if economy issustainable. The starting point of economic analysis, therefore,should be survival needs of man. Economics should be concernedhow human beings meet their survival needs and what makes themsucceed and what makes them fail to survive. It can hardly beover-emphasized that this is an economic problem for manycountries and communities in the world. Conventional economicsdoes not specifically study this issue. It takes care of growthassuming that survival will follow. Biology suggests that forliving organs it is the other way round. The same needs to bevisualized for economy. Survival should be a cornerstone ofeconomic analysis of human activity, to start with. Growth willtake care of itself. Our economic analytical framework needs tospecially focus on it. How to build-in this focus in an economicanalysis is something where A&P approach can help us. This isconsistence with the divine economic philosophy that we find inIslamic system of life.

The goal of nearly all body systems is to maintain life.However, life is extremely fragile, surviving under extremelyuncertain environment. To ensure survival in uncertain and oftenhostile environment, body needs several factors at its disposalnot only to survive and thrive but also to fight the random or

regular changes in environment. This is a rational starting pointfor the study of economic behavior also.

Homeostasis A&P observes that trillions of cells in body remain

constantly active and a balanced equilibrium continues to bemaintained despite various changes taking place in the externalenvironment. This ability of the body to maintain relativelystable internal conditions even though the outside world iscontinuously changing is called Homeostasis in A&P terminology. This ability exists in human behavior too. Human beings do showthis ability and capacity to maintain such balance. Humanapproach towards maintaining this ability in fact is theequilibrium that we need to study. How a balanced equilibrium inhuman activities continues to be maintained despite variouschanges taking in the society’s environment outside human’scontrol needs to be the subject of what we should call Economics.This balance is different from what we study in conventionalEconomics as ‘equilibrium’. We may justifiably use the termhomeostasis in economic analysis as well, in the same sense as itis used in the A&P. The term homeostasis does not assume anythingto remain constant or unchanged as we do in conventionalEconomics. In fact, it indicates a dynamic state of balancedequilibrium, or a balance in which internal conditions change andvary, always within relatively narrow limits9.

Homeostatic ImbalanceFailure of the homeostatic control mechanism to maintain

homeostasis is an indication of disease. Homeostatic imbalancecan take various forms, always being referred to as disease andexternal measures are taken to treat the disease. This approachcan be taken with respect to various economic diseases at microlevel and macro level in a society.

Homeostatic Control Mechanism

9 Marieb [16] pp 10.

Physiology tells us that a living organism has a mechanism calledHomeostatic Control Mechanism, which helps the organism tosurvive and thrive. This mechanism consists of several factors(like nutrients, oxygen, water, maintenance of body temperature,and desired atmospheric pressure) essential to ensure thesurvival of organism. But mere presence of these survivalfactors is not sufficient. They are required to be present inappropriate quantity and quality to face any sudden, random orsecular change in these factors. While secular changes in theenvironment can be taken care of by developing adequatearrangements to ensure the presence of these factors in rightquantity and quality, a more serious problem is created byuncertain changes and unanticipated changes in these factors.The body has an internal mechanism that is triggered to enablebody to make necessary adjustments to allow the body to surviveas long as possible while waiting for external adjustment to comeinto force. This internal mechanism is called HomeostaticControl Mechanism.

In analyzing economic activity, we need to start withavailability of survival needs, capacity of individuals to accessthese needs and institutional set up to facilitate. Mere presenceof these survival factors is not sufficient. They are required tobe present in appropriate quantity and quality, to face anyrandom or secular change in these factors. While secular changesin the environment can be taken care of by developing adequatearrangements to ensure the presence of these factors in rightquantity and quality, a more serious problem is created byuncertain changes and unanticipated changes in these factors. As the body of human beings has an internal mechanism that istriggered to make necessary adjustment in the body to survive aslong as possible, waiting for external adjustment to come intoforce we should try to search this mechanism in the humanactivity that seeks necessary adjustments in economic endeavorsto survive as long as possible (and give chance to growthmechanism to work in its normal pace). This internal mechanism wecan refer to Homeostatic Control Mechanism human economic

behavior10. Measuring and ensuring the strength of this mechanismin members of a society and what remedial factors can revive thismechanism if the mechanism starts weakening due to some exogenousfactors will be an important contribution of Economics humanknowledge how to improve human wellbeing on earth.

Homeostatic Control Mechanism in physiology is a communicationsystem within the body to accomplish homeostasis. Electricsignals are used by nervous and endocrine systems to accomplishhomeostasis. Nerves or blood borne hormones serve as informationcareers. The homeostatic control mechanism has three components:

(a) Receptor or censor that monitors and responds to changes in theenvironment.

(b) Control center, which receives information from receptor andanalyzes the information it received and then determines theappropriate course of action.

(c) Effector provides means for the control center’s response toeffect the control mechanism.

A simple example is a cooling system at home, which isconnected to a thermostat. Thermostat contains receptor as wellas control center. If the thermostat is set at a certain levelsay 22oC, then the cooling system (effector) will beautomatically put on whenever temperature exceeds 22oC and willbe automatically put off when temperature drops below 22oC.

A similar approach is very much logical to understand andimprove an economic system. We need to define a sort ofthermostat that monitors an individual state of survival. Thisthermostat, or whatever name we give it, can lead us to develop areceptor as well as control center. If survival status dropsbelow a certain level, then effector should get triggeredautomatically to come into action to give strength to individualsto survive. The effector will guide the individual to approach

10 It will be explained at appropriate place later that divine guidance leads us to develop an environment an environment to encourage each other to find and feed hungry. This environment is conducive to the homeostatic control mechanism to ensure survival so that the factors contributing to natural process of economic growth continue to operate without break.

institutions in the society that provide will provide him supportto survive11.

It is this approach that forces us to take an institutionalapproach to understand economic problems faced by humanity todayand work on strengthening the institutions that would serve ashomeostatic control mechanism in the economy. It is thisunderstanding that will identify such economic diseases asextreme poverty, high unemployment incidence, high concentrationof income and wealth etc. and how to solve them.

11 If there is no such institutional arrangement, the effector may lead the individual to snatch, to beg or to steal