ISB 544 (ISLAMIC ECONOMICS)

PREPARED FOR:USTAZ ASYADI BIN REDZUAN

PREPARED BY:FATIMAH AZ-ZAHRAH IZHAM 2008533961SITI SURAINI ABU BAKAR 2008531871SITI NURFATEEN SHARI 2009603306

THE METHODOLOGY OF ISLAMIC ECONOMICS

INTRODUCTION

• Methodology is the study of method.• Economic methodology is the study of

method, usually scientific method, in relation to economic, including principles underlying economic reasoning.

• Methodology is theory of theories: in the field of economics it refers to the process economists use to validate the knowledge about economic phenomena.

DEFINITION OF ISLAMIC ECONOMIC

SOURCES OF ISLAMIC ECONOMICS

• The Quran Is the book of God and contains general and broad

guidelines for the conduct of human beings.

• Sunnah The speech, action or tacit approval of the prophet

as recorded in the books of traditions.

• Islamic law and jurisprudence A vast legal literature developed by the Muslims

jurists who have been elaborating and deriving inferences about the economics questions.

• History of the Muslims Contains much scattered materials about the

economic life of the people and useful precedents for the present - day economy.

• Data relating to economic life Muslim studies the real life condition and

behaviour of the people and uses the available data for analysis and formulation of policies.

• The basic function of methodology is to help in reaching the truth

• The hard core of Islamic economics consists if evidences of Quran and Sunnah of the Prophet (S.A.W).

• Verses of the Quran and Hadith of the Prophet (S.A.W) form the hard core of the Islamic economics:

• “God takes away (gain) from usury but adds (profit) to charity”

(al-baqarah 2:276)(al-baqarah 2:276)

SIGNIFICANCE OF ECONOMICSModern Economics

• The basic assumption is that man is selfish by nature he behaves rationally.

• Material progress is supreme goal.

Islamic Economics• It is not true that man is

selfish by nature.“....Muslims prefer others over themselves although they are in difficulty...”

(al-hasyr59:9)(al-hasyr59:9)• The material progress is not a

supreme objective in an Islamic society.“....the primary emphasis on the well being of man is in the ‘akhirah...” (Ibrahim 14:3)(Ibrahim 14:3)

Modern Economics

• Every person has an inherent tendency to maximize his material welfare and he also has the knowledge and ability and deciding what is good for him.

Islamic Economics

• Islam considers man incapable of knowing what is best for him. Only God has perfect knowledge.

“....the human knowledge is imperfect and needs guidance for various decision in life....”

(an-Nisa’ 4:11)(an-Nisa’ 4:11)

NATURE OF METHODOLOGY

• In evaluating the performance of economics, methodology is; i. explain what economics are doingii. how well they are doing;iii. suggests what they should be doing in

view of the priority objectives.• Methodology helps explain the nature of the

theories behind economic behaviour and human action.

• It also aims at prescribing acceptable method and techniques of economic inquiry in order to enlarge the stock of knowledge.

• Important issues methodology deals with are;i. The purpose of economic inquiryii. The sources of knowledge relevance to it iii. The subject matter and the scope of inquiryiv. The limits of application of knowledgev. The decision about the appropriate structure

for testing economic model

METHODOLOGY OF ISLAMIC ECONOMIC

NORMATIVE

• Meaning: The Muslim economists have the obligation to

discharge the Qur'an duty of enjoining what is proper and forbidding what is improper.

This is also studies and suggest ways and means for achieving Falah.

It suggest what particular policy actions should be recommended to achieve a desirable goal.

• Example: It may be of interest to study the effect of the

prohibition of interest on the level of saving and investment

Study of the effect of zakah on the consumption level of the society.

DEDUCTIVE

• Meaning: The logical process of deriving a conclusion from

a known premises or something known to be truth.

From theory comes with the conclusion Explanations and predictions

• A deductive argument is valid if an only if the truth of the conclusion actually does follow necessarily the premises

• Example:All men are human beingAdam Smith is a manTherefore Adam Smith is a human being.

• Deductive reasoning is sometimes contrasted with inductive reasoning.

INDUCTIVE• Meaning

The logical process of establishing a general proposition on the basis of observation of particular facts.

From observation to theory Facts from observation

• Example: All man that have ever been seen are human

beings; therefore all man are human beings.

COMPARISON METHODOLOGY OF ISLAMIC AND MODERN ECONOMIC

ISLAMIC ECONOMIC• Framework is derive from a

divine texts (Quran & Sunnah) and no changeable.

• Combination of inductive method;Testifies assumption and

prediction on rationally and empirical evidence

MODERN ECONOMIC• Based on human ideology,

subject to criticism and changeable.

• Deductive method;Use assumption which

are not always be realistic.

ISLAMIC ECONOMIC• Builds on ethical value such

as justice and benevolence. Islamic ethical value are

part of economic theories and would not be falsified by any hypotheses and actual data.

• Normative explore ways and means to change the existing economic into truly Islamic economic

MODERN ECONOMIC• No escape from value

judgement, but economics must produce falsifiable hypothesis.Hypothesis testing

eliminates personal, social or political prejudices and value judgements.

• Positive studies the existing economics phenomena without being overly concerned with altering that phenomena.

ISLAMIC ECONOMICS

• Specific question/aimAim: Falah of man an

creating the social and institutional condition which maximize Falah of a society.

All knowledge has a purpose which derived from Islamic worldview .

MODERN ECONOMICS

• No specific criterion / aim It pursues research for

the sake of research or knowledge for the sake of knowledge.

CONCLUSION

• Islamic economic need not be confined to anyone method.

• It should remain open to all the methods provided the enquiry remains within the basic framework of Islam and its satisfy rationally and empirical evidence.

• The main occupation of Muslim economists should be to present and analysis of the application of the Shari’ah in the present day.