A second School of thought is that of the need-based Humanistic Economics designed to “promote human welfare by recognizing and integrating the full range of basic human values.”65 Instead of basing itself on the old psychology of utilitarianism, which emphasized wants and wealth, it looks to humanistic psychology and emphasizes need satisfaction and human development to move towards what Abraham Maslow calls ‘self-realization’ or ‘self-actualization’.66 Consequently, it takes into consideration all human needs, irrespective of whether they are physiological (food, clothing, shelter), psychological (safety, security, love, sense of self-worth), social (belongingness), or moral (truth, justice, meaningfulness).
A third School is that of Social Economics which involves a “reformulation of economic theory in the mould of ethical considerations”.67 Commitment to the imperative of value neutrality, the sacred ideal of the Enlightenment scientists bequeathed by economists, is here considered as both untenable and undesirable – untenable because scientific inquiry is based on assumptions which tacitly involve value judgements; undesirable because scientific inquiry cannot avoid addressing questions of public goals and social priorities in resource allocation. Any discipline committed to value neutrality cannot succeed in evaluating policies and recommendations for public choice. Such an evaluation necessarily involves value judgements. Hence, according to Sen, “the distancing of economics from ethics has impoverished Welfare Economics and also weakened the basis of a good deal of descriptive and predictive economics.” His conclusion is that economics “can be made more productive by paying greater and more explicit attention to ethical considerations that shaped human behaviour and judgement.”68 Hausman and McPherson have also concluded in their survey article in the Journal of Economic Literature on ‘Economics and Contemporary Moral Philosophy’ that: “An economy that is engaged actively and self-critically with the moral aspects of its subject matter cannot help but be more interesting, more illuminating and ultimately more useful than one that tries not to be.”69
A fourth School is that of Institutional Economics, which argues that human behaviour is influenced by a number of interrelated social, economic, political and religious institutions that define the way individuals are expected to behave. Organizations act as agents of change by making individuals behave in the desired manner through changes in benefits and costs. This School carries great promise because it can help explain how changes in institutions over time influence the present and the future and why some economies perform better than others. It can also help explain cooperation and coordination and a number of other behaviour patterns in human society which neoclassical economics is unable to do by concentrating primarily on self-interest and competition. These possibilities have gradually raised the conceptual and practical importance of studying the role of institutions in human society.
The problem however is how to derive values which command wide acceptance and which are observed with a sense of moral obligation such that anyone who violates them is censured. Can conventional economics help bring about such a consensus? Probably not. “Social morality,” as Schadwick has aptly observed, “depends on agreed standards, upon a consensus which is received as so axiomatic that it hardly ought to be discussed”, and that, “except in the case of a small number of exceptional groups of people morality never had been separated from religion in the entire history of the human race.”70 Utilitarianism and social contract theories do not carry the potential of providing values which everyone accepts as given and which no one challenges. Even Social Economics cannot be helpful, in spite of its genuine emphasis on values, because it is a “highly pluralistic discipline inspired and enriched by several often radically different worldviews, Schumpeterian visions, and at times even quite antagonistic social doctrines.”71 Conflict of views and interests may lead to differences of opinion which may be difficult to resolve. No wonder Minsky remarked: “There is no consensus on what we ought to do.”72
Decline in the sanctity of ‘self-interest’ and ‘economic man’ and the emphasis on need fulfilment and value judgements are, nevertheless, welcome developments. They show that man is not necessarily condemned to living with inequities. He is capable of rising to the occasion, of analyzing his problems, and of knowing what is wrong. However, what is not so easy is the remedy. It does not lie in a patchwork of cosmetic changes. The remedy lies in reorganizing the whole of society and the economic system in such a way that, on the one hand, there is a transformation of the individual from the economic man to a morally-conscious human being who is willing to live up to the demands of brotherhood and socio-economic justice and, on the other hand, a restructuring of the entire economy in such a way that needs are fulfilled without generating imbalances, and inequalities of income and wealth are not only not generated but also substantially reduced.
Even though the revival of emphasis on values and institutions is laudable, their introduction into conventional economics is bound to be an uphill task. This because there is, as Galbraith has pointed out, “the vested intellectual commitment to established belief,” which views economics as a science and sets “the standard of intellectual precision” by the hard sciences.73 Nevertheless, there is no room for pessimism. In a recent report given by John Hey to the Council of the Royal Economic Society after ten years as Managing Editor of The Economic Journal, he lamented that “few economists ask themselves what are the crucial problems facing society. If they did so, they might produce more relevant material.”74 This enables one to look forward to a future when finding solutions to crucial problems faced by mankind may be considered an important task of economics. Once this has happened then there may also be a realization that there are also non-economic and non-market ways of solving them. It may not then be taboo to inject the moral, psychological, social, political and historical dimensions into economics.
THE RELEVANCE OF ISLAMIC ECONOMICS
This brings us to a discussion of the paradigm, goals and method of Islamic Economics. This need not give anyone the impression that the attempt is to demolish the good and valuable analytical work done by conventional economics over more than a hundred years. It would be difficult not to agree with Blaug when he says that: “any methodological prescription that amounts to wiping clean the entire slate of received economics and to starting all over again from scratch may be dismissed out of hand as self-defeating.”75 The historical record of Muslims shows a great deal of realism in this respect. They borrowed from other cultures whatever they found to be useful and in harmony with their own values, and they did whatever they could to improve and build upon it. The effort of Islamic Economics would be to give the realization of humanitarian goals a prominent place in its paradigm and to define efficiency and equity in terms of these goals. It would also inject values and institutions, along with major non-economic variables and a historical dimension, into the analysis developed by conventional economics so as to better understand the reasons for the inability of Muslims to realize their desired goals. It would not shy away from making policy recommendations to realize these goals. A number of economists are doing exactly the same even in the West. Islamic Economics cannot afford not to benefit from all these efforts.
The question then is, why introduce the prefix ‘Islamic’ before economics? The answer being that the chances of creating a consensus in the Muslim world are greater if the discussion takes place within