Gain deeper insight into the principles and theory of Islamic economicsIntroduction to Islamic Economics: Theory and Applicationprovides an overview of the organizing principles and fundamentals of an Islamic economy. With deep discussion of the characteristics, rationale, key institutions, objectives, and instruments at work, the book addresses the core economic principles underlying a system based on the foundational teachings of Islam, and examines the implications for economic policies. Social welfare, economic justice, market functionality, efficiency, and equity are explored from an Islamic perspective, and the role and instruments of fiscal and monetary policy in Islamic systems are used to illustrate contemporary applications.
Universities around the globe are offering courses on Islamic economics and finance, but despite the industry's rapid growth, most research has been focused on the financial principles rather than underlying economic principles. The first book of its kind,Introduction to Islamic Economicsbrings all the key concepts together into one reference volume. By outlining the ways in which Islamic finance and Islamic economics interrelate, this book can help readers to:
Develop an understanding of the Islamic economic system and its institutional scaffoldingDifferentiate between the major characteristics of the dominant conventional economy and one based on the fundamental sources of IslamUnderstand the conditions that must be met for a just, well-balanced, stable, and growing economyClarify the role of State, public policy, and risk-sharing in the Islamic financial system
The Islamic financial system is expanding quickly, and those looking to increase their relevance in a changing economic landscape must get up to speed.Introduction to Islamic Economicsprovides a comprehensive overview of underlying economic system offering a deeper understanding of the feature of the system. This book is an excellent complement toIntroduction to Islamic Finance, 2E by Iqbal and Mirakhor.
Hossein Askariis 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 Iqbalis 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 Mirakhoris 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 areIntroduction to Islamic Finance(Wiley 2011),Risk Sharing in Islamic Finance(Wiley 2011), andThe Stability of Islamic Finance(Wiley 2010).
Acknowledgments xiAbout the Authors xiii
CHAPTER 1
Economic Systems 1
What Is an Economic System? 2
Current State of the Global Economic System 9
Islamic Economics Paradigm 19
Short History of Economic Thought in Islam 20
Summary 26
Key Terms 27
Questions 27
CHAPTER 2
Foundation of the Islamic Economic Paradigm 29
Meta-Framework and Archetype of Economic Rules 31
Implications of the Agent-Trustee Relationship 33
Significance of Rule Compliance 34
Impact of Scarcity 35
Rationality and Freedom of Choice 38
Individual Obligations, Rights, and Self-Interest 39
Central Notion of Justice 41
Shariah: The Law 44
Summary 47
Key Terms 47
Questions 48
CHAPTER 3
Institutional Framework and Key Institutions 49
Key Institutions 53
Summary 72
Key Terms 72
Questions 73
CHAPTER 4
The Islamic Economic System 75
Social and Economic Justice 76
Prohibition of Interest (Al-Riba) 81
Risk-Sharing Economic System 84
Role of the State 91
Summary 93
Key Terms 94
Questions 94
CHAPTER 5
Key Microeconomic Concepts 95
Defining Microeconomics 97
Issue of Needs versus Wants 100
Consumer Behavior 102
Theory of the Firm 105
Dynamics of Demand and Supply 112
Efficiency versus Equity 116
Market Models 117
Role of the State 121
Summary 123
Key Terms 124
Questions 124
CHAPTER 6
Key Macroeconomics Concepts 125
Principal Economic Agents 126
National Income 127
Consumption, Savings, Investment, and National Incomec Determination 135
National Income and Output Determination 143
Inflation 148
Unemployment 152
Open Economy: Trade in Goods and Services with Other Countries 154
Why International Trade Is So Central to Islam 156
Summary 162
Key Terms 163
Questions 164
CHAPTER 7
Macroeconomic Equilibrium: Characteristics of anIslamic Economy 165
Models of an Interest-Free Economy 166
Summary 184
Key Terms 185
Questions 185
CHAPTER 8
The Financial System 187
Notion of Risk Sharing 190
Building Blocks of the Islamic Financial System 191
Takaful (Islamic Insurance) 210
Summary 216
Key Terms 217
Questions 217
CHAPTER 9
Role of the State and Public Policy 219
Basic Roles of the State in All Economic Systems 220
Role of the State in the Islamic Economic System 224
Policy Instruments of the State in Islam 228
Economic Justice and Public Policy 230
Role of Public Policy 232
Summary 243
Key Terms 244
Questions 244
CHAPTER 10
Fiscal Policy 247
Role of Fiscal Policy 250
Fiscal Policy in an Islamic Economy 254
Public Finance 259
Summary 267
Key Terms 268
Questions 268
CHAPTER 11
Monetary Policy 271
Role of Monetary Policy 272
Monetary Policy in an Islamic Economy 277
Summary 303
Key Terms 304
Questions 305
CHAPTER 12
Economic Development and Growth 307
Evolution ofWestern Economic Thought: From Smith to North and Sen 307
Foundation and Framework of Development and Growth in Islam 312
Islamic Perspective on Financial Inclusion 322
Summary 330
Key Terms 331
Questions 331
CHAPTER 13
Economic and Social Welfare 333
Social Safety Net Provisions 335
Concept of Safety Net and Welfare 337
Empirical Evidence on SocialWelfare from Select Muslim Countries 339
Summary 359
Key Terms 360
Questions 360
CHAPTER 14
Economic State of Affairs in OIC Countries 361
Public Policy in the Islamic Economic System 362
Dimensions of Economic and Social Achievements in Muslim Countries 364
Summary 372
Key Terms 373
Questions 373
Glossary of Arabic Terms 375
Bibliography 381
Index 393
