Now that we have a general understanding of what the study of economics is (see part 1 here), we can move on to the big question: what is Islamic economic? To truly answer this question, we have to take a slight theoretical detour into the realm of moral philosophy.
All economic theories — from the classical thinkers to the institutionalists, the Keynesians to the Austrians, the Marxists to the neo-classicalists — have a philosophical under printing. The main/dominant ideology within microeconomics today is what is commonly known as the Neoclassical School, or “Welfare Economics”. From a secular approach, the neoclassical school utilizes a consequentialist moral base: the value of an action (i.e., is it “good” or “bad”) is based purely on the propriety of that action. The concepts then of whether an action is labeled “good” or “bad” are subject to cost-benefit analysis and valued by the consequences of the action. Every action has a certain level of benefit, known to economists as utility, and a certain amount of costs. If the gains in benefit outweigh the increase in costs, the action is “good”; if the gains in benefit are outweighed by the increase in costs, the action is “bad”. Continue reading