Chapter 5: Analytical tools of Islamic economics: choice and the equi-marginal principle
Economics as a discipline attempts to resolve what to produce and consume with limited resources at the disposal of individuals and the society. Given the scarcity of resources, the economic problem entails making choices to attain well-defined goals. One of the main contributions of the founders of the neoclassical school (Jevons, Menger, and Walras) to modern economics is outlining the principles of how choices are made in the face of scarcity. In doing so, they provided the analytical tools of the choice process. Optimization under constraints by rational agents using the equi-marginal principle describes how choices are made and forms the micro-foundations of the neoclassical economic analysis. Islamic economics, a nascent discipline, integrates Islamic principles with economic science. The distinguishing feature of Islamic economics vis-a-vis conventional economics is that, while the latter is considered value-neutral, the former is value-laden. The values are derived from Shari’ah and have implications for the behavior of individuals and economic transactions. The basic principle that emanates from literature on Islamic economics is ‘freedom of action and collective responsibility’ (Nasr, 1989: 520). Though a lot has been written on the nature and attributes of Islamic economics, some basic issues are still unresolved. For example, how the fundamental problems of choice and scarcity are addressed analytically under the value-laden framework is obscure.
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