Introduction to Islamic Economics
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Introduction to Islamic Economics
Theory and Application
Hossein Askari
Zamir Iqbal
Abbas Mirakhor
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Dedication
Acknowledgments
We are indebted to Omar Fayoumi for assisting with Chapter 5 and to Hamid Shafiezadeh for his work on Chapter 6. The suggestions of the Wiley editorial staff have been invaluable. As always, we are grateful for the support of our families.
About the Authors
Hossein Askari is the Iran Professor of International Business and International Affairs at the George Washington University. Before coming to GW, he was a professor of Business and Middle Studies at the University of Texas at Austin and assistant professor of Economics at Tufts University. He has also served on the executive board of the International Monetary Fund and as consultant to a number of governments, institutions, and multinational corporations. He received all his university education at the Massachusetts Institute of Technology, where he earned a BS in civil engineering and a PhD in economics.
Zamir Iqbal is a lead specialist at Finance and Markets (F&M) Global Practice of the World Bank. He heads the World Bank Global Center for Islamic Finance Development in Istanbul. He has more than 20 years of experience in risk management, capital markets, and asset management at the World Bank Treasury. Islamic finance is his research focus, and he has coauthored several books on Islamic finance topics such as banking risk, financial stability, and risk sharing. His most recent coedited book, Economic Development and Islamic Finance, was published by the World Bank in 2013. He earned his PhD in international finance from the George Washington University and serves on the professional faculty at the Carey Business School of Johns Hopkins University.
Abbas Mirakhor is currently the first holder of the chair of Islamic Finance at the International Center for Education in Islamic Finance (INCEIF). He served as the dean of the executive board of the International Monetary Fund from 1997 to 2008 and as the executive director representing Afghanistan, Algeria, Ghana, Iran, Morocco, Pakistan, and Tunisia from 1990 to 2008. He has authored numerous publications and research papers on Islamic finance; among them are Introduction to Islamic Finance (Wiley 2011), Risk Sharing in Islamic Finance (Wiley 2011), and The Stability of Islamic Finance (Wiley 2010).
Chapter 1
Economic Systems
1. The differences between economic systems and the role that government plays.
2. How the ideal Islamic system differs from the Western market capitalist system.
3. The role of markets and how they differ in Islam and in the market capitalist system.
4. What institutions are and why they matter for economic prosperity.
5. Governments have an important role no matter the system.
Over the years, a number of different economic ideologies and systems have been proposed and promoted. As with most other things in life, economic doctrines and systems have a limited shelf life and evolve with time. While in 2014 the mixed capitalist market system of the Western world, especially that in the United States, may appear preeminent, it received a number of shocks at its very foundation. The financial crisis of 2007–2008 with its extensive fallout and the rapid rise of China as an economic power have raised new and fundamental questions about the long-term direction and viability of the laissez-faire mixed capitalist system practiced in the United States and other Western nations.
After World War I, economists generally realized that neoclassical economics was not well equipped to address the reasons underlying unemployment, business cycles, and their mitigation and amelioration. During the Great Depression, John Maynard Keynes's General Theory of Employment, Interest, and Money provided some answers.1 As a result, Irving Fisher and Alfred Marshall's neoclassical theories were resurrected and reborn into the Keynesian framework. After World War II, a number of economists, including Hicks, Samuelson, Tobin, Solow, and Modigliani, further developed the Keynesian approach in what came to be known as neo-Keynesian macroeconomics. Although the Keynesian