Economic Rationalism versus Islamic Rationalism
1.1. Definition:Rationalism
a) Rationalism- is one of the most loosely terms in economics, because anything can be rationalized once uses refer it to some relevant set of axioms.[i]
b) Rationalization of the most varied character haves existed in various department of life & in all areas of cultures.
c) 'Economic rationalism' –was first used in Australia, also known as ‘Thatcherism’ in Britain and ‘Reaganomics’ in USA. Rationality and individual preference are the most important assumption of neoclassical economics.
d) 'economic rationalism' was used by Weber and Tawney to refer to the view that commercial activity, particularly borrowing and lending, represents a sphere of activity in which moral considerations, beyond the rule of business probity dictated by enlightened self-interest, have no role to play.[ii]
e) Economic rationalism is the dogma which says that markets and money can always do everything better than governments, bureaucracies and the law. There is no point in political debate because all this just generates more insoluble conflicts.-(Michael Pusey)[iii]
f) Economic rationalist views simply hold that, generally speaking, markets usually provide more satisfying answers to questions of choice, consumer preference and so on and in doing so, provide a more rapidly advancing level of total well-being for all concerned than decisions by diktat, whether those be by politicians, bureaucrats or controllers generally- John Stone
g) Economic rationalism – a government’s free-market approach to economic management, typically reflected in the adoption of privatization, deregulation, user pays, and low government spending as indicators of economic success’ [Australian Pocket Oxford Dictionary][iv]
1.2. Goal of Rationalists:
After the emergence of capitalism, the theory of consumer behavior developed on the basis of Economic rationalism and Utilitarianism.
(1) Economic rationalism states human behavior as being founded or rigorous calculation, directed with foresight & caution toward economic success.
It explains that, economic success is different as- ‘Making of money out of man’ which implies that the acquisition of wealth is the goal of life & yardstick of economic success.
Greater efficiency is a sacred goal of economic rationalists. Increased competition and the unlocking of market forces are the key means to obtain it.
Economic rationalists are highly suspicious of government intervention. They believe that the central aim of policy should be the establishment of a framework in which the efficacy of market forces is maximized and hence where resources can be allocated as efficiently as possible.
Policies should therefore concentrate on improving the dissemination of information, improving the mobility of labor and other resources, discouraging restrictive practices and, to state the obvious, trying to encourage as competitive a system as possible.
Economic rationalists insist that the public sector tends by nature to be inefficient, in part because it is not subject to the market disciplines which the private sector faces. Despite the problems, the public sector needs to model itself wherever possible on the private. And where public sector activities can be or are being done in the private sector, then the public sector should surrender such activities.
Economic rationalists are, of course, aware that markets can fail. But they will generally believe that, whatever the problems of market failure may sometimes be, they are as nothing to the demonstrated and persistent proofs of government failure where governments are employed in place of markets.
Result:
The result will be an increase in net economic welfare: the economy will become more dynamic and scarce resources will be allocated more efficiently but consumers are not concerned about morality.
(2) Utilitarianism is the sources of moral values and attitudes. Honestly is useful because it assures credit so are punctuality, industry & frugality.
From this dual origin, emerged consumer theory states that, the maximization of utility is a postulated objective of the consumer- whose sole goal is to achieve the highest level of economic satisfaction and whose any stimulus is the sense of money.
1.3. Two stages consumer theory under capitalist system:
Marginalist theory.
Measurability and cardinality of utility.
1.3.1. stage-1:
Marginalist theory- Implies/states that, the utility of consumer is rigorously measurable in cardinal units.
Utility is maximized i.e.
Equilibrium = Marginal utilities of the various commodities= Ratios of their money prices.
Now, conditions is-
Marginal Rate of substitution i.e. the slope of the indifference cure= Ratios of Money prices i.e. slope of the income constraints.
dx2/dx1= P1/P2
MRS=P1/P2
MRS= Economic rate of substitution.
MRS= ERS.
1.3.2. stage-2:
Measurability and cardinality of utility
1.4. Islamic Rationalism:
1.4.1. Definition:
Islamic rationalism is suggested as an alternative which is consistent with the Islamic values.
1.4.2. The criticism the ideas of max Webbers:The criticism the ideas of max Webbers as follow:
(1) It is limited and one aspect of human behavior.
(2) It is based rigorous calculation directed with foresight and caution toward economic success.
1.4.3. Unique ideas about Islamic rationalism:
Islamic economic thinkers are not agreed with max Webber definition. They gave the unique ideas about Islamic rationalism.
a) The concept of success:
The concept of success in Islam is always associated with moral values. M.N. Siddiqi says. Success lies in being in being virtuous.
The more one’s behavior is in accord with moral standards and the higher the level of his goodness, the more successful he is throughout his life, in each and every phase of existence, at every step, the Islamic individual is endeavoring to act in harmony with moral values.” (Siddiqi, some aspects of the Islamic Economy, PP 15, 16)
Virtue implies a positive attitude toward life and other human beings.
Above discussions state that, the pursuit of economic progress is not a vice according to Islam. It becomes one of the virtues if it is balanced and intended for a good cause.
b) The time scale of consumer behavior:
A consumer, who follows Islam, usually considers two periods, here and here after life for his consumption choices or actions.
For thus consumer, life before death and life after death are closely interrelated in sequential Manner.
Effects: Two effects of his choices or actions are:
First: Its immediate effect in this life and its later effect in the life to come. The utility derived from such a choice is the total of the present values of there two effects.
Second: The number of alternative uses of one’s income is increased by the inclusion of all the benefits that will be gained only in the hereafter.
Examples of such alternative uses are-
- Interest free loans (al-qard al-hasan)
- Donation to the poor and needy
- Cave of animals
- Spending for the welfare of the future generation.
- Improvement of the community life.
- Propagation of the message of Islam.
- Promotion of goodness.
- Time and effort forth improvement of the spiritual moral and economic life of the community.
c) Different Ideas from Capitalist/ Communist:
Above discussion implies that, many alternative uses of one’s income may have positive utility in the Islamic frame of reference, although their utility benefits in the capitalist or communist frame of reference may be zero or negative.
References and evidences:
The Quran unequivocally emphasizes this behavioral norm for material and spiritual matters a line in order to secure a balanced life. It says:
Corruption has appeared on land and sea of the civil which mean’s hands have done, that He (Allah) may make hands have done, that He Allah may make them taste a part of that which they have done, in order that they may turn back (from civil).
Say Mohammad to the disbelievers: Travel through they earn and sea the nature of the consequences for those, who were before you. Most of them were idolators whose disbelieves must bear the consequences of his disbelief while those who do right make provision for themselves. (30: 41-42, 44)
“But if there comes to you guidance from then whoever follows my guidance will not go astray nor come to grief. But he who turns away from remembrance of me, his will be a narrow life. (20: 123, 124).
“And I have said: seek pardon of your Lord; Indeed He is ever- forgiving. He will send rain to you in abundance and will help you with wealth and sans and will bestow upon you gardens will bestow upon you rivers” (71: 10-12).
d) The concept of wealth:
Islam sees wealth is a bounty from God. Islam permits an individual to be a owner of wealth as vicegerent of lord.
Islam disapproves of poverty, created for not having wealth, As Prophet peace be him- Poverty is almost equivalent to denying Islam.
Prophet used to pray:
Almighty God, Protect me and help me to avoid incapability and laziness, fear and avarice, protect me and help me to avoid poverty, disbelief and misbehavior; O-God, I request you to guide me on the path to you, to give me love & fear of you, to make satisfied with what you give me and to me give richness.
Criticism:
Economic rationalism is economic policy without social moral consideration, or "the view that commercial activity ... represents a sphere of activity in which moral considerations, beyond the rule of business probity dictated by enlightened self-interest, have no role to play."
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