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Maximisation postulates and their efficacy for Islamic economics

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  • Hasan, Zubair

Abstract

This paper examines the nature and role of maximization postulates concerning profit and utility in the mainstream price theory formation from a methodological perspective. Mainstream economics retains these postulates, despite much criticism, mainly for two reasons. Firstly, they help establish cause-effect linkages among economic variables and markets. In that they greatly facilitate predictions and their empirical verification over a wide field of inquiry. Secondly, no other behavioral rule has so far been established that gives equally valid, if not superior, results over such range. It is argued in this paper that the postulates are required in Islamic economics as well for the same reasons. Maximization, per se, is not un-Islamic: what is maximized, how and for what purpose are the real issues to investigate for passing judgment. Contrary to the current position in the literature, we find it preferable to include moral values and social considerations of Islam in the assumptions of economic theorems, rather than attempting to include them in the objective elements of the models, until Islamic economics evolves as an independent subject. For maximization is a mathematical concept, and cannot fruitfully accommodate what cannot somehow be measured.

Suggested Citation

  • Hasan, Zubair, 2002. "Maximisation postulates and their efficacy for Islamic economics," MPRA Paper 3006, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3006
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    File URL: https://mpra.ub.uni-muenchen.de/3006/1/MPRA_paper_3006.pdf
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    References listed on IDEAS

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    1. Bayulgen, Oksan, 2005. "Foreign Investment, Oil Curse, and Democratization: A Comparison of Azerbaijan and Russia," Business and Politics, Cambridge University Press, vol. 7(01), pages 1-37, April.
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    Cited by:

    1. Shaikh, Salman, 2013. "Micro-foundations of God-Conscious Economic Agents in Islamic Economy," MPRA Paper 53806, University Library of Munich, Germany.
    2. repec:ksp:journ3:v:4:y:2017:i:1:p:108-118 is not listed on IDEAS
    3. M. Kabir Hassan & Mervyn K. Lewis, 2014. "Islam, the economy and economic life," Chapters,in: Handbook on Islam and Economic Life, chapter 1, pages iii-iii Edward Elgar Publishing.

    More about this item

    Keywords

    Approaches to Islamization of knowledge; self-interest and ethics; concept versus reality; profit maximization; profit versus wages; profit sharing schemes; utility maximization;

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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